Wine Equalisation or Wine Inequality?
Wednesday 28 September
There’s a bit of a kerfuffle in the Australian wine industry about a tax rebate both Australian and New Zealand wineries receive.
Pernod Ricard-owned Premium Wine Brands and Treasury Wine Estates have called for the Australian federal government to reform the Wine Equalisation Tax (WET) rebate, claiming it is sustaining the country’s glut.
In its submission to the Australian federal government, Premium Wine Brands said it “believes that existing wine tax arrangements are distorting market forces by sustaining the 20 per cent of vineyards, which the industry…found to be surplus to market requirements and incentivising the production and sale of cheaper wines, contrary to the industry endorsed strategy of value building through premium, branded products. We believe that tax reform would end these distortions and allow normal market forces to address the structural oversupply issues.”
What is the WET rebate?
It’s a bit technical but WET is a value-based tax paid on both New Zealand and Australian wines consumed in Australia. An agreement between the two countries, allows both domestic and Kiwi producers to claim an annual tax rebate of 29% up to a maximum of AU $500,000 and was originally intended for the purpose of smaller producers. Interestingly, Australian wines sold in New Zealand get no tax relief.
It is estimated that AU $900 million is collected as WET each year, and more than $200m is returned to producers as a rebate, of which $30m goes to New Zealand producers.
Is reform necessary?
The Winemakers’ Federation of Australia has been working with the government for two years on reforming the wine rebate, admitting it needs some adjustment. It seems some industry members have been abusing the system. The Federation agrees the rebate is unintentionally helping growers to stay in the industry, when their business is unsustainable.
Stephen Strachan, head of the Winemakers’ Federation of Australia told rebeccagibb.com, “The WET rebate is not intended for bulk wine but growers have been producing surplus grapes and converting it to wine to sell through certain retail outlets at discounted prices. In these cases, the WET rebate is keeping the producers in the market and hitting the pace of reform.”
The likes of Treasury and Premium Wine Brands have submitted documents to the federal government in advance of its tax summit next week but Strachan added, “The Australian treasurer has indicated he is not having alcohol discussed at this summit”. Thus, is this all a storm in a teacup?
A New Zealand perspective
And what does this mean for Kiwi producers? Should they be worried? Well, the Closer Economic Relations (CER) trade agreement between Australia and New Zealand would have to be torn up if they were going to abolish the WET rebate for Kiwi wines sold in Australia. Which is unlikely.
Strachan admitted that while it was frustrating New Zealanders benefitted from this, he added “The only way we can cut out New Zealand would be to cut out a lot of the legitimate Australian wineries. The Australian government can’t distinguish against New Zealand because of the CER.”
I asked Philip Gregan, head of New Zealand Winegrowers, what the impact would be if the WET rebate was abolished. He answered, “There is around $20-$30 million coming back to the New Zealand wine industry each year from the WET rebate so it obviously has an impact. Wineries can do many things with that money”.
But, I’d like to hear from producers – what does the rebate mean for you? Do you care? Do you think it’s unfair?
My first look at 2008 Bordeaux
Monday 19 September
I had my first opportunity to try the newly-arrived 2008 Bordeaux vintage last week, and I was pleasantly surprised. I admit, I’m no Bordeaux expert – the world has enough of those – but they were attractive wines.
Retailer Glengarry charged $79 to try seven wines with a retail value of $1800 and, astonishingly there were only around a dozen of us attending. If we had been in Hong Kong rather than Auckland, I’m sure the room would have been packed to the rafters. Still, it meant we were able to have seconds of our favourites!
Inevitably, the wines were all very tight even seven hours after decanting. Most were oak dominant with bags of vanilla or hazelnut on the nose and palate. However, there is a lovely freshess of fruit and a lightness on the palate despite great concentration coming from low yields. The wines all had lovely balance that comes when the fruit is not overripe with moderate alcohols and medium to fresh acidity.
Wines of the night were Chateau Pontet-Canet, a fifth-growth (and a so-called Super Second) from the village of Pauillac, practising biodynamics. It’s a seamless wine, dense and powerful yet only medium bodied. It’s a masculine wine style with firm yet fine, drawn out tannins. Black cherry and pencil lead aromas with lots of vanilla oak. Fresh with focus and drive. (19/20)
When you write that many descriptors plus a lot more I won’t bore you with, you know you’ve got a complex and fabulous wine on your hands. That’ll be why it’s NZ $280. If only I were a doctor or lawyer I’d have taken a case.
I really enjoyed the Leoville Barton, a second-growth from St Julien. A completely different wine to the Pontet Canet, it is much more feminine, silky and delicate. It doesn’t have the power nor the tannic structure of St Estephe or Pauillac. It is nicely focused on the mid palate and displays great balance. My note ends ‘A powerful wine wrapped up in soft silk’ (18/20). And at $90 cheaper than the Pontet Canet and $30 cheaper than Lascombes, which was a little bit strange for a Margaux, it represents good value.
Cos D’Estournel and Haut Brion’s second wine, Le Clarence, were both structured, powerful wines worth recommending too (I didn’t spit so they must have been smart!)
Disappointment of the night was the St Emilion estate Pavie Macquin. It was what I call ‘worked’. The winery had extracted the grapes to within an inch of their life and the fruit flavours and tannins were overextracted and a little bitter. If you paid $190 for it, you would feel robbed. Ah, but isn’t that Bordeaux for you?!
Prosecco, but not as we know it
Monday 29 August
To be or not to be Prosecco? That is my question
In July 2009, the EU ruled that producers making Prosecco outside of the DOC and new DOCG area in the Veneto region would be forced to use the new grape name Glera on their labels instead of Prosecco.
So, on my return to New Zealand from Blighty, I was a little puzzled to be presented with a bottle of Toi Toi ‘New Zealand Prosecco’. What the….?
It’s not made from the grape formally known as Prosecco (‘Glera’) but a blend of Riesling, Muller-Thurgau and Pinot Gris. The sparkle is not created by the tank method, used in the Prosecco region but carbonated. So, I am curious as to why the front label clearly states Prosecco on the front. The accompanying press release claims it is “produced to broadly reflect the origins and style of the Italian wine”. Well, it’s 11.5% alcohol, which is about right, medium-dry with apple and pear characters but I’m not sure the Venetians will be overly impressed by the quality of the contents.
John Barker, general counsel for New Zealand Winegrowers shed some light on the matter. If this wine is only sold in New Zealand, there should be no problem, as there is no agreement with the EU on this law.
Barker says, “It’s a bit of a funny position the Italians have taken. There’s no geographical area called Prosecco if you look on a map – the GI is an artefact of EU law. There’s no grape variety called Prosecco either because the grape is Glera.
“It’s absolute nonsense,” he adds.
So, the only domestic stumbling block comes from if the label is considered to be misleading – and that’s a personal matter. Personally, I think it’s misleading but you can make your own mind up.
The week that was
Friday 19 August
French producers started to return to their estates this week after their annual August holidays. I was on the news desk at Decanter.com and here’s the highlights of this week’s news.
It was a busier week than anticipated with the harvest beginning unusually early in Bordeaux. Sauternes star Chateau d’Yquem and rose producer Chateau de Sours started to pick the first grapes on Wednesday.
On Friday. Champagne producers in a number of villages were also permitted to start the harvest. The only harvest that has ever been earlier was the sweltering 2003 vintage. Grape growers and Champagne houses came to a compromise to allow 12,500kg to be harvested per hectare this year – more than 20% up on 2010, in response to growing demand
Heading to the southern hemisphere, New Zealand was covered in snow. The white stuff even fell in Auckland for the first time since 1939. Unhappily for one winery, it wasn’t just the weather that was gloomy. Gisborne winery Amor Bendall has gone into liquidation. The company has faltered amid the oversupply situation, the strength of the New Zealand dollar, and tough competition. The question is, who’s the next victim?
Over the Tasman, Australia is also struggling with its oversupply problems, and change is not happening fast enough, according to its generic body, Wine Australia. Its chief executive has been brutally honest, admiting many players are still in denial that the problem is long-term and requires major change. The new realities reshaping the industry include depressed trading conditions in its two main export markets: the US and the UK; the continued strength of the Australian dollar, higher production costs and tougher competition in all markets. Bulk wine sales and ‘opportunistic brand trading’ have also eroded margins, said Wine Australia’s Andrew Cheesman.
Manzanilla habit
Monday 8 August
I’m currently researching the emergence of sherry bars in London and the current fortunes of the sherry industry. While it means drinking a lot of sherry like Tio Pepe en Rama and a 1968 Oloroso with iberico jamon and other delicious morsels (woe is me), it also involves a lot of staring at statistics.
The UK head of the Sherry Institute of Spain supplied me statistics enough to drive me to drink but also some fun statistics from New Zealand. From the figures, it would seem I am making a fair dent in the Manzanilla sales in the country. I probably drink a couple of litres of the stuff each month, so 12 litres in the first half of the year. In the past six months, just 352 litres of Manzanilla were exported to New Zealand, making my personal consumption almost 3.5% of the country’s total consumption!
Fino exports are thankfully rather higher at more than 6000 litres between January and June.
It might come as no shock to Brits that almost 60% of sherry sales in Aoteroa are sweeter styles like ‘medium’ and ‘cream’. I have moved thousands of miles yet can’t get away from a nation of sweet sherry drinkers. On the other hand, there are a lot of British ex-pats and even a British corner-store selling Branston pickle, Yorkshire tea and I’m sure if I ventured in, there’d be a dusty bottle of Croft or Harvey’s Bristol Cream on a shelf.
So, inspired by the likes of Jose and Pepito I may have to run a Sherry evening upon my return to New Zealand – who knows, it might improve the stats!