Why Australian wine is flowing in US sewers

A big vintner plans to dump $32 million worth of its product because of a big mistake in forecasting American demand.

By Jason Notte Jul 16, 2013 3:03PM
Wine cellar (© Carlos Davila, Photographer)

Apparently, even cost-conscious American drinkers don't have a taste for cheap, easily spoiled wines sold at Wal-Mart (WMT).

 

As reported by Quartz, Australian vintner Treasury Wine Estates, a producer of more than 80 brands from discount store favorites to the more high-end Penfolds Grange, is taking a $145 million hit for the year ending June 30 because it wildly overestimated how much wine it would sell in the U.S. That doesn't include the $36 million TWE will spend to offload wine for pennies on the dollar, or the $32 million in wine that's just going down the drain.

 

Why is this wine getting the same shabby treatment once reserved for French vintages when its home country didn't get on board with invading Iraq? Well, because unlike pricier wines, these $2 to $5 bottles don't improve with age.

 

In fact, they turn sour and gross. Basically, if you've been keeping that bottle you picked up at Rite-Aid in the cellar, you're just making a really rancid bottle of vinegar.

 

According to the Wine Institute, an industry group, U.S. wine sales grew by 2% by volume and 6% by value in 2012, continuing 19 consecutive years of growth. However, low-budget imports from Australia are getting squeezed by homegrown products from California and elsewhere as the U.S. recovers from its recession. Sales of California wines plummeted from $18.9 billion in 2007 to $17.9 billion in 2009, then rebounded to a record $22 billion just last year.

 

That has TWE in a tough spot. Between an Australian grape glut that's pushing down prices and an American market increasingly smitten with its own wines, TWE's sales dropped by 13% since 2010.

 

Bank of America/Merrill Lynch analyst David Errington went so far as to insist that TWE give up on its U.S. business. "I can't remember ever getting the US right. . . . You've cleaned the business out now. Why not just sell it?" he said in a conference call with TWE.

 

In the meantime, TWE is in the odd position of dumping wine to avoid damaging its brand. Considering the company has already announced that it expects to ship less wine to the U.S. this year, it appears the damage will be done whether that spoiled wine is in America's wine racks or its sewers.

20Comments
Jul 16, 2013 4:53PM
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Start up obamawine!  Give it to all of the moochers and freeloaders livin off of the gubment teet!

They will love it! It's free to them and someone else has already paid for it.
Jul 17, 2013 6:50AM
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I prefer  to support one of the few US industries by drinking wine from California, New York State and Michigan. We have a wonderful selection of home grown wine.  Most Australian wines are tasteless.
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What the hell do you expect from a 3.00 bottle of wine? We're lucky to have a ton of wine producers in this part of PA and they sell directly from their own stores at a reasonable price. You can't even get a good bottle of vinegar for 3.00.
Jul 16, 2013 5:59PM
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why not sell to a salad dressing company?

Jul 18, 2013 7:50AM
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Nooooooo.... send all that wine to ME!

Jul 16, 2013 3:42PM
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Don't pour it down the drain, sell it at Furthur

Jul 18, 2013 11:42AM
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If you produce a good product in the first place it will sell regardless of the market flucuations espeically good red wine. However, from the article it sounds as if the majority of the products being dumped are crap to begin with. Personally, I believe American wines, especially those on the west coast, are just as good as any produced elsewhere in the world with a few exceptions. Yes, there is always exceptions when it comes to wine. Everyone has a favorite or two. White wines should be drank in the frist few years after being bottled. What's interesting is that TWE would rather dump the wine rather than sell it at a loss or even give it away to some charitable cause. We could have a wine and bake sale...........
Jul 19, 2013 2:49AM
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Drink beer, whiskey, bourbon, and grape juice. Forget wine. Awful swill. 
Jul 18, 2013 11:31PM
Jul 18, 2013 11:19PM
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Really , you drink wine from Michigan?  I believe it's called 10W-40 Cabernet...good luck with that!
Jul 16, 2013 4:11PM
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You don't think it had anything to do with trailer trash Wal-Mart customers who drink Bud & Jack and often together, but can't say resveratrol so they don't drink wine?
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