Economics and Culture of Australian and French Wine

Lynne Kiesling

Charles Bremner is the (London) Times Paris correspondent, and he had an interesting post the other day about the economics and culture of French and Australian wine:

Australia’s success at selling its supposedly simple-minded wines has now created something of a French-style grape glut around Adelaide, with producers turning out too much plonk (a good old Australian word, by the way). But arriving from France, with its antique regulations and years of violent protest by angry growers, it is refreshing to be somewhere that sees wine as a straightforward business in which you make a product with the aim of finding a customer.

The same thoughts apply to Australia as a whole. The cliché of the matey, blokey, easy-going continent may be overdone, but a week in Oz offers an antidote to life in over-crowded, ever-defensive, continental Europe. Australia’s informality is refreshing after France’s stiff manners. In Paris, my young concierge of six years standing still calls me Monsieur and my local shop-keepers maintain a chilly distance. In Australia, you use first names immediately and the cashier ends the transaction with “no worries, mate.” French anguish about foreigners taking over the economy do not have an Australian equivalent. Parisians, on the other hand, do not fret over some current Adelaide preoccupations, such as the size of your barbecue or whether the new Ute (known in French as le pick-up) has got a slot for the Esky (une glacière, or ice-box, for cooling the beer).

He also discusses the “wine glut”, the apparent large quantity of low-quality plonk being produced in both France and Australia. Good discussion, but he doesn’t resolve the issue. So I ask: is the production of lots of plonk a reflection of customer preferences, or is there something else going on? Producers trying to shape preferences, “down to lowest common denominator” to decrease their production costs or increase their margins? Is there a mystery here?

Thanks to my dad for the link.


4 thoughts on “Economics and Culture of Australian and French Wine

  1. The most important difference between the two industries is that Australian farmers don’t receive subsidies of any sort. In fact, the explosive growth of Australian wine grape production in the 1990s was influenced, in part, by the withdrawal of a government-managed reserve price scheme for wool. Farmers diversified into higher value land uses, including wine grapes in areas where the agronomic conditions suited it.

    Wine marketing is another key difference. Australian winemakers carefully selected strategic price points in export markets (first the UK and then the US) that were undersupplied, researched the type of wine most likely to sell for less than $8 and both expanded the market and took share away from the “old world”.

    In Australia periodic gluts of certain grape varieties are an inevitable market reality. Like all agricultural goods, wine supply varies from year to year depending on the growing season. There is also a delay effect in the transmission of market signals because a bull market in chardonnay, for example, may cause new entrants or additional acres of planting, which won’t manifest for several years until the vines mature.

    The problem for the Australian industry right now is the explosive growth in sales of the past ten years has petered out, partly because the previously undersupplied, sub-$10 markets are more competitive, and partly because the Australian dollar is less competitive than its was in 2000-03. Thus in a glut situation there is less supporting the grape price than there was five years ago. Prices are falling more than previously, which suggests some bargains can be had next southern summer – if you want to venture down under.

    As to your specific question, gluts in Australia are a lagging indicator of past preferences. Right now I can tell you there’s an explosion of diversification going on in the Australian industry, with winemakers experimenting madly, and growers bringing to market niche varietals. This is just a rational response to a previous glut where the industry found it had too much chardonnay and cabernet sauvignon to fill the market space. Watch out for some great Bordeaux-style Aussies coming along in two or three years.

    In France I suspect the reasons for consternation about the glut stem from the rigidity of the Common Agricultural Policy. Note that in Bremner’s article the French industry rep sees the solution as somehow protecting French wine from competition … in foreign markets. Talk about arrogant.

  2. I think the simple answer is that Australian wine growing was developed under a settler colonial culture which took pragmatism not only a given, but a cultural value. The linking of French growing to market demand would not happen in the same way (susbsidies or no susbsidies) because the production is imbued in a culture that enables and limits various kinds of productive practices. Of course, in the 1970s the bulk of Australian (and NZ) wine was crap. But with the expansion of the middle class and the demand for better wine it could much more easily decide to rip out old vines and remodel itself. That then becomes marketed as characteristic of “new world” wines, and has become agenda setting. When your brand is associated with a particular region and type of grape or style of production, that kind of flexibility might not be possible.

    However, the price points at which the middle classes will buy “good wine” (instead of the casks of bad riesling they might have drunk a couple of decades ago) are still limited. About $US8 is about the limit for cheaper bottles here in NZ, and it is where the bulk of the market is. After that, you basically go to $US15 and up, which is a different market altogether, and hard to do volume. To come in at the cheaper end requires a reliable brand, advertising, and distribution. This is wine as FMCG, it requires a totally different kind of organisational structure to make it work.

    I’m dubious about the cultural biases in Bremner’s article. I for one am not “impressed” by the settler spirit of ripping out huge tracts of land for get-rich-quick schemes. And I fail to see the long term value for the French industry in copying the settler model. You can see palates becoming more sophisticated in settler societies and demand for more complex and distinctive tastes, rather than ones that announce their composition up front. French wine knowledge is arcane lore and is thus well suited to an informational economy. Also, visiting a vineyard in France is pretty much nothing like visiting in Australia, it has a lot more of the “different experience factor” that only comes when people have been doing the same thing for a long time. The future of French wine to me seems to be in these niche, high-value areas.

    [fwiw, I rarely drink anything other than relatively straightforward new world wine, even though I have friends who collect French wine. I’m trying to stay focussed on the business strategies and their link to information/culture]

    interesting topic

  3. I think the simple answer is that Australian wine growing was developed under a settler colonial culture which took pragmatism not only a given, but a cultural value. The linking of French growing to market demand would not happen in the same way (susbsidies or no susbsidies) because the production is imbued in a culture that enables and limits various kinds of productive practices. Of course, in the 1970s the bulk of Australian (and NZ) wine was crap. But with the expansion of the middle class and the demand for better wine it could much more easily decide to rip out old vines and remodel itself. That then becomes marketed as characteristic of “new world” wines, and has become agenda setting. When your brand is associated with a particular region and type of grape or style of production, that kind of flexibility might not be possible.

    However, the price points at which the middle classes will buy “good wine” (instead of the casks of bad riesling they might have drunk a couple of decades ago) are still limited. About $US8 is about the limit for cheaper bottles here in NZ, and it is where the bulk of the market is. After that, you basically go to $US15 and up, which is a different market altogether, and hard to do volume. To come in at the cheaper end requires a reliable brand, advertising, and distribution. This is wine as FMCG, it requires a totally different kind of organisational structure to make it work.

    I’m dubious about the cultural biases in Bremner’s article. I for one am not “impressed” by the settler spirit of ripping out huge tracts of land for get-rich-quick schemes. And I fail to see the long term value for the French industry in copying the settler model. You can see palates becoming more sophisticated in settler societies and demand for more complex and distinctive tastes, rather than ones that announce their composition up front. French wine knowledge is arcane lore and is thus well suited to an informational economy. Also, visiting a vineyard in France is pretty much nothing like visiting in Australia, it has a lot more of the “different experience factor” that only comes when people have been doing the same thing for a long time. The future of French wine to me seems to be in these niche, high-value areas.

    [fwiw, I rarely drink anything other than relatively straightforward new world wine, even though I have friends who collect French wine. I’m trying to stay focussed on the business strategies and their link to information/culture]

    interesting topic

  4. I think plonk is a reflection of most customer preferences.

    When I got married, my then fiance and I delegated to my father the job of choosing the wine and bubbly on the basis that he had some mates with vineyards and should be able to get a good bulk deal. To my surprise, he took it up as a major project and any visitor to Mum & Dad’s house was presented with several anonymous samples of bubbly and asked their preference. The vast majority of people favoured the cheapest one.

    A friend who is intensely into wine stated that this is common in blind testings. People generally drink cheap wines, and therefore prefer them as they are accustomed to the taste.

    While there are fanatics who love great wine, they are always going to be a small proportion of the population. The people who don’t adore great wines are generally not the undifferentiated proletariat but people who put their money and mental energy into different things.

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