According to the most recent figures from the Wine Federation of Australia, 85% of the winemakers in that country are currently making a loss, with a further 10% either breaking even or registering a marginal profit. In other words, only one producer in 20 can be properly described as making money. In case anyone imagines that these awful statistics only apply to Australia, I’d direct their attention to Rabobank’s similar analysis of the French market a few years ago. And the Deloitte report revealing the low margins achieved by smaller New Zealand wineries. Australia is simply readier to wash its dirty linen in public.
So, to repeat my question, why are we all here, in a basically unprofitable industry when we could be turning our talents and investment to making spirits or creating video games? Most of us, I’d argue, fall into one of two camps. In the Old World especially, there are the people who are in this industry for the same reason that their neighbours grow corn or breed cattle. Because that’s what their parents and grandparents did. They’ve inherited a vineyard or a distribution business and they fall into the business like actors’ children who can’t help but follow their parents towards the footlights. Then there are the people who have been bitten by the wine bug. One day, they are successful widget-makers or gynaecologists with a nice house and some cash in the bank; the next, they are living the fantasy as full- or part-time vineyard owners.
The thing both these groups have in common is that far too few in either have ever drawn up a business plan, let alone considered the return each year’s vintage is making. How many give dispassionate thought to the kinds of wine they are making? These are pretty certain to be the styles traditional in – and/or required by – their region, or stuff that suits the owners’ personal taste. For both groups, the idea of tailoring wine to suit the consumer is almost unthinkable.
The two groups – whom I’ll brutally call peasants and hobbyists – are sustained in their attitude and behaviour by their neighbours. And, just as importantly, by the people to whom they sell their wine and the media on whom they rely for marketing. Apart from the merchants who have taken over their business from their parents, the distributors have often chosen wine-selling as more congenial way to make a basic living than some of the more stressful or mundane alternatives. What could be more pleasant than spending one’s time among bottles of delicious liquid and people who make or drink it? So what if the margins are low? Money isn’t everything.
Those are three words with which most wine writers would readily agree. Setting aside the bloggers who have so little regard for lucre that they share their knowledge and opinions for free, the majority of opinion-formers write for publications that pay far too little for them to live on at any but a modest level. Fortunately, they often know that supplementary income from parents or partners will enable them to play alongside their more generously-salaried lawyer and banker friends. And, yes, they too get to spend time among bottles of delicious liquid and people who make or drink it. And to mock anyone who has the temerity to stick a €100.00 ($110.00) price tag on a Provence rosé.
It’s a very seductive picture. And fundamentally self-destructive in purely business terms. If your neighbours or friends are not making a proper margin on their wine, it makes it hard for you to do so. And if entire regions are conspiring to sell at little better than breakeven, well, that will have its impact on producers making comparable wine elsewhere.
Of course, there are plenty of exceptions to this rule in the shape of dynamic members of wine dynasties, and newcomers to the industry who create thriving businesses – people with the cojones to offer a €100.00 rosé. Unfortunately, they are just that: exceptions. And there are some regions – Pauillac and Napa spring to mind – where better margins are routinely achieved, but only by those sufficiently well-heeled to work there.
I freely admit to fitting into the picture I’ve painted. And I’d prefer to spend time with many of these non profit-motivated people than some of the suits I’ve met who work for ultra-commercial US wine corporations. I think I know why we’re here today, but how many of us will be here tomorrow?
