Aussie Export Juggernaut Rolls Along

The killer Aussie export juggernaut Drinks and Diversions told you about in March is gathering even more speed as the 1999 harvest down under careens to a finish with a huge, high quality crop.

"Winemakers across Australia are celebrating one of the finest white wine vintages of this decade," said Philip Laffer, chief winemaker for Jacob's Creek, Australia's No. 1 brand, which is distributed in the U.S. by Fortune Brands (FO). "We are still harvesting the last of the red grapes, and whilst too early to be definitive, we expect the 1999 vintage will be the biggest ever for Australia."

What's good news for Australia, of course, is bad news for those American winemakers who compete with the Australians in the low-priced export market. Nowhere is this malady more prominent than in Japan -- where a surge of buying by Japanese wholesalers in 1998 has glutted the local market.

Even so, the Americans remain in denial: As recently as mid-April, the California Wine Institute issued a press release boasting of "a whopping 134%" increase in exports to Japan with 1998 shipments totaling $93 million. True, but even as the news release was being written, a different reality was emerging. Wine industry statistician Jon Fredrikson of San Francisco-based Gomberg-Fredrikson & Associates calculates that U.S. exports to Japan dropped 58% in the first two months of 1999, and says that wines were backing up on the docks and in the warehouses there.

Peter Gower, international business development director for Beringer Wine Estates (BERW), was quoted in the May 15 issue of industry newsletter Wine Business Insider as saying that Beringer wines were "backing up" in Japan and that orders had slowed. A slowdown for Beringer's could be a bad omen of things to come, particularly for those who are trying to expand in the export market by going upscale. Beringer tends to sell higher-priced premium wines, and was a pioneer in the Japanese market, having established their distribution there in the 1980s when it was still owned by Nestle. Beringer spokeswoman Mora Cronin told D&D that Gower and others who could provide comment were unavailable.

From Cool Markets to Cool Weather

While the cooling export market may be worrying wineries, the minds of wine fanatics attending the annual Napa Valley Charity Wine Auction this weekend are more on the unseasonably cool weather. Meteorologists say temperatures in Napa, Sonoma and the rest of the North Coast have been averaging about four degrees colder than average.

This may be good news for attendees: The event often suffers from sweltering Valley weather -- which in 1996 was so hot that it caused some of the charity wines to leak out of the bottle, popped the corks of others, and caused at least one custom-etched bottle to explode.

The cooler weather has also gotten the 1999 wine grape crop off to a slow start. If it continues, it could extend the growing season and keep a lid on vineyard yields that are approaching glut levels. Even so, growers are unlikely to experience the same respite they enjoyed last year, when heavy El Nino summer rains contributed to a 1998 harvest that was 14% lower than the record harvest of 1997. And if the mercury climbs back up to normal, all bets are off.

The Wrath of Grapes

While the cold weather may postpone the coming wine glut by a bit, the oversupply is still pretty much on schedule to flood the market in 2000 -- or 2001 at the latest -- thanks to overplanting by new vineyards and lackluster consumption growth. That's the premise of my new book: The Wrath of Grapes: The Coming Wine Industry Shakeout and How to Take Advantage of It .

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