Australia: Boom to bust, and the journey back

Australian wine has certainly had its ups and downs in recent years, but Jamie Goode finds cause to believe it’s now truly back on track.

AUSTRALIA HAS RE-FOUND ITS MOJO. It lost it for a while, but now it’s back on track. But how did a once dynamic, successful wine industry lose its way? The boom, bust and gradual recovery of Australia’s wine industry is a valuable lesson for any wine-producing country.

Some context. Australian wine as we know it today is a relatively recent phenomenon. Back in 1966, domestic consumption was a little over two bottles per head. Chardonnay didn’t exist and a mere 700 tons of Cabernet Sauvignon were crushed. Close to 80% of production was of fortifieds: ‘ports’ and ‘sherries’. Things shifted fast, though, and during the 1970s and 1980s table wines emerged as domestic and export markets sprang into life. Domestic wine sales grew from 10m litres in 1964 to 36m in 1975. The Chardonnay revolution also occurred: 1,000 tons were crushed in 1979, and by 1989 this had risen to 28,000 tons. By 1996, Aussies were drinking 24 bottles per head per year, and 80% of production was table wine (the current percentage of wine grapes used for table wine is 94%).

It was also in 1996 that the Australian Wine & Brandy Corporation (AWBC) and the Winemakers’ Federation of Australia (WFA) launched a document that was to shape the next stage of this industry: Strategy 2025. The vision was that by 2025 Australia should achieve A$4.5bn in wine sales, becoming the most influential and profitable supplier of branded wines in the world. By 2007 most of these goals, including the sales targets, had been achieved. From export sales of A$200m in 1990, a peak figure of A$3bn was reached in 2007. At this stage, Strategy 2025 was revised, partly because there was a realisation that this boom was a fragile one, without a solid basis.

Trouble was coming. In the four years from 2007 there was a cataclysmic slump in exports, from A$3bn to A$1.8bn, with the US in particular being strongly hit. In 2008 the value of wine exports to the UK shrank by 17.5% and to the US by 23%. A number of factors contributed to this fall.

The Australian vineyard area had doubled in the 1990s. But many of the new plantings were in warm, irrigated areas. A series of droughts meant that farming these became more expensive – and to a degree unsustainable. And the grapes produced from here were often of relatively low quality. The likes of Shiraz, Cabernet Sauvignon and Chardonnay didn’t respond so well to the hot climate, and big brands, which had previously included grapes from more established, higher-quality regions, began to be less interesting. Increasingly, producers would cover over the cracks by blending in grape juice concentrate – reds began to taste a little sweet, with some of the most successful brands having as much as 10g/litre residual sugar. Corporate mergers and buyouts of some of Australia’s most famous names didn’t help, either.


Influential US wine critic Robert Parker also discovered Australia in the late 1990s, and began awarding very high scores to sweet, ripe wines. This encouraged other producers to pick late and make sweetly fruited, alcoholic wines. In particular, he praised highly the wines imported by Dan Philips and his company The Grateful Palate (which made many wines specifically for the US market in partnership with winemakers), and made a star of winemaker Chris Ringland.

These big, seductive wines sold very well in the US, but after a while collectors there began to realise that they tasted rather similar and that they didn’t cellar very well, and stopped buying them. In response to falling demand, The Grateful Palate began cutting its portfolio in 2008, then in 2010 it went out of business.

The strong Australian dollar also caused severe problems. Growing demand for Australian raw materials from China’s expanding industry pushed the Australian dollar to ever greater heights, to the point where it reached parity with the US dollar. This was obviously a problem for export sales, and when coupled with a fall in export demand caused by the great financial crisis of 2008, it was a disaster in the making.

The road back from this boom and bust has been a long one, but signs are that things are looking up. Wine Australia has also acted very smartly, realising that it needs to tell the story of Australian wine again. This is not the country of big brands with cute animals on the label – it is a country of 64 regions spanning many climatic zones, from cool to hot; it is about 100 different grape varieties; it is about 2,500 small producers. The result? A diverse and interesting wine scene. This has been the focus of the marketing.

There’s been a move towards farming more sensitively, with biodynamics, organics and sustainable farming taking the spotlight. There has been a wave of small producers who want to work more naturally, picking earlier to preserve acidity and aid site expression, and using alternative forms of elevage such as concrete and large oak, moving away from small new oak. The excess of the past has been toned down, along with the oak, and now, for example, Australian Chardonnay is showing a lot more restraint and poise. There’s also been an exploration of alternative varieties, more suited to some of the warmer, irrigated regions, including new stars such as Fiano and Nero d’Avola.


So how are things going now? Since 2013, exports have been recovering. There has been steady growth and now they stand at $2.5bn, which is still some way behind the heady days of 2007, but the trend is positive. Three free trade agreements with China, Japan and South Korea have recently been made, which should make Australian wine more competitive in these markets. China, with its 1.4bn people and growing middle class, is a very attractive market for Australia, and leading producer Penfolds has made a particular effort here. Australia has joined Chile and New Zealand in not facing an import tariff, while South Africa, the US and Argentina face a 14% tariff on bottled wine and a 20% tariff on bulk-shipped wine. China is now the most important market for Australian wine by value (A$848m), with a growth of 63% since 2015. Ninety-five per cent of the Australian wine sold (by value again) in China is red. Tourism is also a factor here: 1.3m Chinese visited Australia in 2017.

The UK has traditionally been Australia’s strongest export market, and in volume terms it is still the largest, at 223m litres. But increasingly this has become about less expensive wine – 80% of this is shipped in bulk and bottled in market.

This is not necessarily bad for quality, but it shows that the demand is for affordable wine, the end of the market where margins are low. It’s not just in the UK, though, that private-label/own-brand wines have become far more prevalent and form the majority of most supermarket wine ranges.


The US, which suffered a large slump, is still a tricky market. Ninety-five per cent of sales in the US are of wines below A$5 per litre. The perception of Australian wine in the US needs some work.

In Australia itself, though, aside from the bottom end of the market, things seem very upbeat.

There’s never been more interesting wine being made here. And one region, in particular, gives a lot of cause for hope because of the way things have turned around. This is the McLaren Vale, which until recently was a relatively unpopular region that gave the impression of being off the pace.

And here, a once unpopular variety, Grenache, is experiencing a quietly dramatic revival. Grenache is one of the most widely planted red grape varieties, and has been successful in the warm, dry conditions found in the south of France and Spain. Even in warm climates, it keeps good acidity and grows well as an untrellised bush vine.

It was a popular choice in Australia, especially during the period of the mid-1920s to the late 1960s when the bulk of wine production was of fortifieds.

The shift to table wines from the 1970s onwards was bad for Grenache. Between 1979 and 2012 the harvest of Grenache fell from 72,000 tons to 15,000 tons in 2012.

As the area under vine in Australia increased, Grenache decreased to just over 1% with 1,500ha. The classic, warm regions of South Australia were forgotten a little as people’s attention turned to cooler areas. And even within South Australia, heads were turned by the bigger, more obviously fruity wines that could be obtained from Shiraz, and even Cabernet Sauvignon.

But its fortunes have seen a shift and people are now talking about Grenache. And the McLaren Vale winegrowers are beginning to realise that they have something rather special – quite a bit of old vine Grenache. The talent of Grenache is in making lighter-coloured, perfumed, elegant red wines, not lacking flavour, but with freshness and nice structure.

In terms of winemaking, techniques such as using some whole bunches in the fermenter and ageing in large format oak, or older oak barriques, seem to work well with this variety. The result is supple, often quite elegant reds that are highly food compatible and very drinkable. Now that winemakers are recognising Grenache’s talents for elegant reds, fewer are trying to force it into a style it’s not good at.


Some impressive examples of varietal McLaren Vale Grenache are emerging. On recent trips, I’ve enjoyed quite a few. Taras and Amber Ochota make one of my favourites. The Ochota Barrels Green Room is an old vine Grenache from McLaren Vale that is particularly haunting and elegant. Then there’s D’Arenberg – Chester Osborn is a champion of Grenache, which has always been the backbone of D’Arry’s Original.

“We have been a big instigator of Grenache in Australia,” says Osborn. “Dad made a huge reputation for his ‘Burgundy’, which had a lot of Grenache in it.” D’Arenberg buys up to half of the McLaren Vale’s Grenache, and makes five straight varietal wines and three GSMs. Osborn surprised many in McLaren Vale with the audacity of his new winery tasting room/visiting centre, the Cube, which even by d’Arenberg standards is crazily ambitious.

Toby and Emmanuelle Bekkers are also making a very impressive Grenache under their Bekkers label, and Peter Fraser at Yangarra is turning out some impressive Grenache from one of the world’s largest biodynamically-farmed vineyards. The Yangarra High Sands Grenache is priced at a premium, and demonstrates just how well Grenache can do. And a beautiful old Grenache vineyard planted in 1934 forms 80% of Noon’s haunting Eclipse, another McLaren Vale star.

There are many stories such as this in the current Australian wine scene. Will there be another boom and bust cycle? Hopefully lessons of the past will be learned, and the foundations of export growth are now a lot stronger than back in the noughties.

Challenges remain – in particular, converting bulk shipments destined for cheap private-label wines to more profitable branded product – but Australia’s wine sector has always been responsive and innovative, so signs are good.