Comments on: Australia at the Tipping Point

By: Australia Holiday Deals

Australia Holiday Deals — Wed, 21 Apr 2010 23:45:51 +0000

I can see how this might become a problem especially when you consider the fixed costs of bottling the wine and the cut that goes to distributors. We do, however, live in a mostly free economy where forces of supply and demand are meant to dictate pricing.

By: Cheerful Iconoclast

Cheerful Iconoclast — Fri, 20 Nov 2009 17:35:55 +0000

I agree we have a long history of doing it, but the economic effect of restricting output is the same.

I’d do away with agricultural price supports and farm subsidies.

By: Mike Veseth

Mike Veseth — Sun, 15 Nov 2009 16:44:45 +0000

Thanks for your comment.
It seems to me we have a long history of restricting agricultural output to support prices here in the United States. That’s what “grubbing up” is all about.

By: Cheerful Iconoclast

Cheerful Iconoclast — Sun, 15 Nov 2009 15:49:32 +0000

Pardon me, but it sounds as if you are advocating coordinated industry action to decrease output. I know nothing about Australian competition law, but in the US this is an illegal conspiracy to restrain trade.

The “problem” of “too much” wine is of course a boon to consumers: quality wine at low prices. If a lot of winemakers are losing money, well, the answer is that the weaker producers will go bankrupt and exit the market. That’s how markets work.

By: steve kirchner

steve kirchner — Thu, 12 Nov 2009 18:53:24 +0000

i agree with Mark Norman about america’s little chickens. in addition to the economic factors he mentions there are also potential problems with american wine itself. ripe fruit, agressive wood and high alcohol typify the ‘american style’ of winemaking. there seems to be an increasing backlash not limited to the usual suspects on the east coast. i’m not advocating a particular winemaking style here (i’m a california guy myself so i’ll leave that to those with more refined tastes) but i think napa and sonoma produceres are facing an uphill battle (and watch out argentina & chile too).

By: Mike Veseth

Mike Veseth — Thu, 12 Nov 2009 15:53:01 +0000

Mark,
Thanks for your comment. It is a good reminder that wine is a still an agricultural product, subject to long and medium term cycles, and not just a manufactured good like beer.

I wrote about the cycles in wine production here
http://wineeconomist.com/2007/09/18/vineyard-economics-boom-and-bust-in-the-global-wine-market/
Mike

By: Mike Veseth

Mike Veseth — Thu, 12 Nov 2009 15:51:18 +0000

Eric,
China is a logical place to look for market share, but it isn’t an easy place to break into and the demand for now is more at the bottom of the market and dependent on those unsustainable prices. I wrote about it here
http://wineeconomist.com/2009/10/13/wine-and-the-china-syndrome/
Mike

By: Mark Norman

Mark Norman — Thu, 12 Nov 2009 14:09:14 +0000

Move over Chicken Little (Australia)make a little room for Chicken Little (America)!

I am predicting a wine lake for Napa & Sonoma (and probably much more) beginning 2011. Far too many are still expecting a return “to the way it was” next year. There are factors that no one wants to hear that will make the 2nd half of next year not very good and in 2011 we may be facing another round of tough times here. Unless something unforeseen happens I am confident that we must be prepared for a significant challenge.

I am very much a “glass if half full” optimist individual but I do believe in facing realities and for being ready for barriers rather than blindly marching forward. Sounds a lot like want you have faced in AU…

If governments stopped playing games…really let the market be free we might begin to see progress towards a balanced supply and demand curve.

I would love to think that the crisis around the world will wake people up and that wake up call would be the prelude to progress but I think we have as much chance of that as really seeing the sky fall!

By: Eric V. Orange

Eric V. Orange — Thu, 12 Nov 2009 14:06:17 +0000

Very interesting read Mike. Does increasing “wine” awareness in China offer hope?