Australia's biggest wine company, Treasury Wine Estates, once (in its long and complicated history) the wine division of brewers Foster's, has just made a staggering announcement: they are planning to destroy $35 million worth of wine currently in the supply chain in the US because they reckon it is too old and harming the image of the company's many brands.
I have been writing about wine since 1975 and I have never heard of such wholesale destruction of wine, and such a public admission that the sort of wine being produced today has such a short shelf life. So much for the old adage that wine improves with age.
This is the company most famously in fine-wine circles responsible for Penfolds. Of course, Treasury's chief executive David Dearie (pictured) is not suggesting that Grange will be poured down the drain, but presumably hundreds of thousands of cases of other brands from their portfolio, which in the US includes Beringer, Cellar No 8, Souverain, Colores del Sol, Meridian, Tierra Secreta and Sledgehammer and in Australia includes Wolf Blass, Rosemount, Wynns Coonawarra Estate, Annie's Lane, Jamieson's Run, Seppelt, Pepperjack, Saltrams, Yarra Ridge, Devil's Lair, Lindemans, Leo Buring and many more, will be destroyed. TWE will dramatically reduce their shipments to the US and are planning to spend up to a further $40 million in discounts and rebates to try to move through the American distribution system excess wine that they judge to be not quite on its last legs. The majority of this excess wine is understood to be relatively basic California wine. The company's turnover last year was $1,680 million. (I'm not bothering to give Australian and American dollar equivalents since the currencies have virtually reached parity.)
Dearie's official explanation of this embarrassing situation is: 'excess inventory affecting TWE's US supply chain has arisen as a result of three elements: over ambitious forecasting of new commercial product launches, improved distributor logistics, and old and out-of-date stock which both TWE and our distribution partners would prefer to destroy. TWE's leadership team in the Americas believes old and obsolete product is limiting the company's growth ambitions.'
Growth could be a while coming – even for their California brands. And the image of Australian wine in the US has suffered by association with cheap 'critter brands' (see How Australia went down under), and any influx of heavily discounted basic Australian-owned brands on to the US market is unlikely to do much to counteract this.
I'd also like to know more about the mechanics of wine destruction in the US. So many people would volunteer to help...
Even before this announcement, and before presumably TWE's export volumes dwindle considerably this year, the Australian wine exporting juggernaut has been running out of steam. The strength of the Australian dollar has of course not helped. Chile looks set to overtake Australia in terms of total volume of wine exported – after Italy, Spain and then France – even if at a lower average price than Australia.