Glut makes Australian wine cheaper than water

Glut makes Australian wine cheaper than water

SYDNEY (AFP) - Australian wine is being sold off cheaper than water, as a glut of grapes pushes the cost of a bottle to below two dollars.

Bumper harvests for three straight years have led to a massive oversupply, with up to a billion litres of unsold wine in storage tanks across the country.

Leading winemakers have seen their shares tumble and many grape growers could be forced out of business.

But for the consumer, it means quality wines are available at a fraction of the normal price as producers move their excess stock in unlabelled bottles known as cleanskins.

"There are more wine bargains around that I have ever seen," said Shane Tremble, merchandise manager for liquor retailer BWS, who has been in the industry for 30 years.

"There is no doubt that the glut is forcing down prices," he told AFP.

Last week, BWS, which stands for beer, wine and spirits, offered a six-bottle pack of 2006 unwooded Chardonnay for 11.93 dollars (8.93 US dollars) -- and quickly sold out.

Tremble said the cleanskin hailed from Mildura, a famous wine growing region in Victoria which boasts big names like Lindemans and Deakin Estate.

A near record grape crush in 2006 meant the wine "would otherwise have ended up on the ground," he said. "We were able to put together a product at a price point that has not been seen for many years."

The Dan Murphy's superstore chain owned by Woolworths is offering a 2005 Cabernet Merlot for just 1.95 dollars a bottle -- this time a cleanskin from southeast Australia. Bottled water sells for around 3.0 dollars a litre.

Adam Jenkins, senior business manager in wine with Dan Murphy's, said it was the cheapest retail price he had seen.

"I have never seen wine sold sub two dollars before," he told AFP, adding that even branded wines were selling at five dollars a bottle due to competitive market conditions.

The prices are reminiscent of the "Two Buck Chucks" in the United States, when a glut of Californian grapes in 2003 allowed a company called Charles Shaw Wines to sell bottles for 1.99 US dollars.

Cleanskin was a term originally applied to unbranded livestock. But it is now synonymous with wine whose label does not identify the maker.

Cleanskins were often of questionable quality and mere "bin ends," as almost every drop of quality wine was used to feed the growing export market.

In the mid-1990s growers embarked on a massive planting program as they tried to catch up with global demand for so-called "new world" wines.

But some believe overplanting has tipped the balance too far, and above average yields for the past three years have drowned the industry in grapes.

The crisis has left up to a billion litres unsold in storage tanks -- more than the entire industry's annual export output.

But the glut has seen the quality of cleanskins improve dramatically as leading winemakers compete to get their excess stock onto the shelves.

"Without doubt it is a good time to be a consumer. There are a lot of good bargains in high quality wines," said Simon Birmingham, director of the Winemakers' Federation of Australia.

"It is a cycle that is putting significant margin pressure on wineries, but it is a good opportunity for consumers to stock up their cellars."

However, Birmingham doubted the current low prices in Australia were sustainable.

"These types of prices are certainly extremely low, but I think they are a short term offer that consumers can take advantage of."