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Hands up all those who have dreamt of owning a vineyard. How much nicer too, if it made economic sense as well as fulfilling fantasies of pottering around nice parts of the world enjoying the fruits of your labour. But dreams that sound better the more wine is drunk should come with a hangover warning. After all, Treasury Wine Estates, the maker of Penfolds, Lindemans, Rosemount Estate and Beringer (among others) is in the process of destroying more than 6 million bottles of its own produce – enough to keep 94,000 Frenchmen in wine for a year.
Sure, industry economics seem like the stuff dreams are made of. More wine is being drunk by more people who are prepared to pay more for it. Meanwhile, not much more wine is being produced. Since 2000, the value of the global wine trade has leapt a wine-spluttering 150 per cent in dollars (80 per cent in euros) and was worth $32-billion (U.S.) last year, says the International Organisation of Vine and Wine. Not all of that is the result of Lafite-loving Chinese billionaires: global consumption has risen 8 per cent and production has not quite kept pace as improving yields fail to fully cover the fall in vineyard acreage. Even as the old world consumes less and produces less – Spain's drinking has fallen a third since the turn of the century and its production almost as fast too – there are new drinkers. China's consumption has risen two-thirds and still has not even reached two bottles a head (France: 64).
So what is up with Treasury Wine Estates? The world's largest listed pure-play wine maker was spun out of Fosters in 2011 and owns vineyards in Australia and the U.S. Both those countries are drinking more and it is in a great location to export to China. The problem stems from its U.S. business and optimistic sales forecasting which has clogged its distribution channels. TWE is confident it has sorted the issue – $155-million (Australian) later, including $35-million to destroy wine – but the saga has raised questions about whether a mid-sized business can compete against the heft of Constellation Brands (Robert Mondavi) or Pernod Ricard (Jacob's Creek). Perhaps the likes of Penfolds would fare better inside a far bigger collection.
Wine makers have a lot to put up with, from Mother Nature to the challenge of selling into a faddy market. Viniculturist wannabes are probably better off opening another favourite bottle: dreaming is still fun, after all.