Smithsonian upsets Warland, Brexit causing inflation

Warland outraged

First read this article published in The Smithsonian online mag here

Now proceed to a letter from Richard Warland RD Oen (1972), who is outraged at the article:

“It is disappointing that such a venerable institution as the Smithsonian has reproduced this misleading sensationalist information. First of all – winemakers the world over have ALWAYS used (legally prescribed) additives.  

“Some countries allow additives which other countries do not. Addition of cane or beet sugar, for instance, is allowed in France, but banned in my country, Australia. 

“As wine is a beverage for human consumption, the policing of additive use is VERY strictly enforced. Even China, which is well known for various food scandals, analyses imported wine and bans some if illegal additives are detected.  

“Secondly, while their contribution has been significant, US enologists (we call them oenologists) are in a distant second place compared with wine science developments in Australia – the home of Treasury Wine Estates. Since the early 1950s Australian oenologists, supported by the Australian Wine Research Institute in Adelaide, have revolutionised the science of winemaking. This has had two major impacts:

  1. Australian winemaking and viticultural methods and technology are now copied all over the world. Our winemakers are in demand even in the ‘Old World’ wineries of France, Spain, Portugal and Italy.  
  2. In just 50 years Australia has gone from a beer and spirits culture to what international wine globetrotter, Robert Joseph, described to me as ‘arguably the most sophisticated wine market in the world’. The USA has a long way to go before it achieves that!”

Brexit or excuse?

Reports from the UK say Pernod Ricard will increase the price of wines and spirits by about 16 per cent. Brexit is blamed. But is it an excuse?

Brexit is said to be the reason the pound is devaluing, and it has fallen since the result of the people’s vote was announced last June. Against the euro it’s running at 1.165. In the past year, it reached a high of 1.317 (pre June 2016), but after the vote dropped to 1.106.

Despite the Bank of England attempting to keep inflation at 2 per cent or below, it rose to 2.3 per cent in February, with a forecast of it moving closer to 3 per cent mid year.

Kantar Worldpanel’s latest report, covering the 12 weeks to 26 March, says: “Rising prices cost the average household an additional £21.31 during the past 12 weeks.”

As inflation is likely to continue to escalate, it’s understandable consumers will look for better prices, and where they will look? To the German discounters Aldi and Lidl. It’s this move, and the resulting loss of sales, that is making the established UK supermarkets uneasy.

The German discounters account collectively for 11.7 per cent of the UK grocery market, according to Kantar.

The total UK sales for Pernod Ricard product accounts for about 3 per cent of their sales. Ironically, the UK is improving for Pernod Ricard, which reported first-half UK sales up 7 per cent.

China in everyone’s sights

It’s looking as if all the Earth’s wine-producing countries are taking aim at China and preparing to fire. The below has been gathered from various media reports around the world in the past week.

South African wineries have been exhibiting at the Great Wines of Southern Hemisphere 2017 trade show in Chengdu and are spinning their success faster than a ballerina doing a fouetté turn. They are building up to SIAL China 2017 in May and ProWine China in November. One media report said:

“While the top five export destinations for packaged South African wine exports are still in the West – the UK, Germany, Netherlands, Sweden, and the USA – China is becoming increasingly important as an export destination.”

China ranks sixth on the SA export ladder, accounting for 9.46 million litres bottled and 6.3 million litres shipped in bulk in 2016, valued at $55.65 million, up 39 per cent. There is plenty of room to grow, as SA only has 2 per cent of the imported wine market in China.

Like other countries, including Australia, South Africa is waking up to the importance of tourism. Middle-class Chinese watching lions on a safari package while sipping on a glass of wine will seek the same wine back home. The question being: do lions outrank kangaroos?

The Chileans are also trumpeting their wine exports to China, and they are far in advance of South Africa. China has overtaken the US as Chile’s No.1 export destination. January-February figures show 68.2 million litres, up 11.9 per cent, went to the dragon, with a value of $36.9 million. Tourism wasn’t mentioned in this article, but TKR wonders how penguins stack up against big cats and bouncing marsupials.

The South Africans were not the only ones wooing the Chinese at the Chengdu trade show. The Georgians were also strutting their stuff and according to the media were signing new contracts.

The Georgians were out in force, with 27 wine companies wanting to get some of the action. Their January-February export figures amounted to 832,552 bottles, or 624,414 litres, some way behind the Chileans, but up 280 per cent. China ranks third among Georgia’s wine exports markets.

Wine Australia (WA) was also at Chengdu, showing wines and smooching with Chinese importers, distributers, retailers, media and their dogs. There were 21 wineries on the WA stand, showing a host of brands and wines, and organising tastings and dinners. It was all a great success, according to the media blurb. There was a quote from Christopher Lim, the Australian Consulate-General in Chengdu:

“We have the best shiraz in the world. When you hold a glass of Australian wine, you are holding a glass of Australian terroir.” 

Poor Lim, holding a glass of dirt topped with imported Australian climate. If it keeps him happy…

Vinexpo has done well out of China. Its show has been a huge success and increased in importance. In a recent presentation, Vinexpo CEO Guillaume Deglise said China would become the second most valuable market for wine within the next three years, overtaking the UK and creeping up on the US.

Current figures, according to Deglise, show that by 2020 the US will be worth US$38.6 billion, and China worth US$21.7 billion. That represents a lot of wine, with the estimate being 94 million cases sold in China by 2020.

Chinese domestic production needs to be taken into account. For the first time there will be a Chinese pavilion at Vinexpo this year.

The lesson for Australian producers: as well as growing the Chinese market they need to ensure they keep what they have. Australian roots need to be put down. It’s never too early to establish a sound base. They need to learn from their experience in  the UK, where they thought they had conquered the market and it was secured for evermore.

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