Is Australian Wine Going the Way of the Tasmanian Tiger?

As much as 73% of Australian land used for viticulture could become unsuitable by 2050 due to climate change. Australian winemakers need to adapt or risk going extinct.

Winemaking is a major industry in Australia, with A$2.11B of wine exports for the year ended June 2016. [1] However, with expected shifts of 0.4 to 3 Celsius in Australian viticulture areas [2] and a grape maturation process that is highly sensitive to climate, Australia’s position as a leading exporter of wine could be threatened. Treasury Wine Estates (TWE), the second largest Australian winemaker by volume and one of the largest winemakers in the world [3], is trying to proactively find ways to survive and thrive in a changing world.

Climate Changes Impact on Wine Production                                                                                                            

It doesn’t take a viticulturist to know that increasing global temperatures can turn grape-growing paradises into barren landscapes. But, even before that doomsday scenario, global warming can have sinister effects on the grape-growing process. One such effect is earlier ripening. (Figure 1)

  Figure 1: Pressing Forward [3]

timingtemperature

 

 

 

 

 

 

 

 

 

You may be asking – so what? You can get the same great-tasting wine earlier, right? Unfortunately, no. Grapes that ripen early just don’t taste as good. In fact, global warming may lead to reduction in grape quality in Australia by 12 to 57 percent [2]. Who wants wine that tastes 57% worse? Not me!

Another challenge is that the ripening period also narrows with warmer weather. This is a supply chain nightmare, as you end up with tons of grapes to process in a short period of time, but not enough capacity to ferment them all. And leaving them on the vine for extra time is not an option. On the vine, the grape continues to ripen and accumulate more sugar. More sugar means more alcohol during the fermentation process, which means compromised flavor (allegedly…). [3]

So, what’s an Australian wine company to do?

Treasury Wine Estates Responds

TWE has recognized climate change as a major risk to its business, and is pursuing a proactive mitigation plan along multiple dimensions (in fact, they’ve been planning since 2004!). [4] [5] This includes:

Pruning vines later in the year, which delays ripening. You can use different pruning strategies to help stagger ripening of grapes on different vines, alleviating the backup in the fermentation process. Simple strategy with no additional cost. [3]

Buying land in cooler areas of Australia and selling land in warmer areas according to a master plan. TWE has been buying land in the cooler climate of Tasmania, and has sold its vineyards in the Hunter Valley (original home of the world-famous Lindemans brand) which TWE described as becoming “hot and dry and expensive”. [6] Ouch. At least Hunter Valley had its day in the sun.

Increasing fermentation capacity. TWE saw the fermentation process was becoming a bottleneck, so the short answer was to just add more capacity. [5]

Improving information collection and sharing across the supply chain. TWE is using “data-rich, interactive maps to analyze environmental changes and inform harvest strategies.” There used to be a two-week gap between the white winemaking season and the red winemaking season. As the climate has warmed, the seasons now sometimes overlap, increasing supply chain complexity. These maps allow TWE to navigate that complexity and evaluate the health of the grapes in real-time, allowing it to tweak processes along the entire supply chain based on that information. [7][8] With shorter ripening periods, time is of the essence.

What Else Can Be Done?

TWE is certainly on top of its global warming strategy, but it takes more than the efforts of a single company when an entire industry is at stake. TWE and other winemakers in Australia should freely share strategies and technologies to mitigate the effects of global warming. When you have the latest and greatest idea or technology, it might be painful to give it to your competitors. But it’s very possible you need every technology and strategy out there to be able to survive. And that’s a reason for everybody to share.

I also believe there should be an increased focus on technological improvements that can help combat the effects of global warming. It can be difficult to support this research, which hits your bottom line without any guaranteed payoff (and the payoff may be used by your competitors even if they contributed nothing). But continued technological advances may be needed for industry survival.

More effective grape sunscreen? [9] Yes please. (711 words)

 

Sources

  1. Wine Australia, “Export Report” (PDF File), downloaded from Wine Australia website, https://www.wineaustralia.com/en/market-updates/~/media/0000Industry%20Site/Documents/Market%20bulletin/WEAR%20%20Jun%2016.ashx, accessed November 2016.
  2. Leanne Webb, Penny Whetton and Edward Barlow, “Future Climate Change Impacts on Australian Viticulture,” March 28-30,2007, Actes du colloque “Réchauffement climatique, quels impacts probables sur les vignobles?” http://chaireunesco-vinetculture.u-bourgogne.fr/colloques/actes_clima/Actes/Article_Pdf/Webb.pdf, accessed November 2016.
  3. Mike Cherney, “Winemakers Toil to Beat the Heat of Climate Change,” Wall Street Journal, September 14, 2016, http://www.wsj.com/articles/winemakers-toil-to-beat-the-heat-of-climate-change-1473857879, accessed November 2016.
  4. Treasury Wine Estates, 2016 Annual Report, p. 11, https://www.tweglobal.com/~/media/Files/Global/Annual-Reports/2016-Annual-Report.pdf, accessed November 2016.
  5. Jane Wardell, “Treasury Wine Estates waters vines underground to combat climate change,” Reuters, October 14, 2014, http://www.reuters.com/article/us-climatechange-summit-treasury-wine-idUSKCN0I30SM20141014, accessed November 2016.
  6. Jane Wardell, “Climate Change Is Going To Destroy The Australian Shiraz As We Know It,” Reuters, July 13, 2014, http://www.businessinsider.com/climate-change-hurting-australian-shiraz-2014-7, accessed November 2016.
  7. Esri Australia, “Smart mapping stamps out climate change sour grapes,” https://esriaustralia.com.au/news/smart-mapping-stamps-out-climate-change-sour-grapes-nar-286, accessed November 2016.
  8. Nicola Bell, “Treasury Wines has changed its business to manage the risks of climate change,” The Weekly Times, May 31, 2016, http://www.weeklytimesnow.com.au/agribusiness/horticulture/treasury-wines-has-changed-its-business-to-manage-the-risks-of-climate-change/news-story/96fae8195a2fba4cf0602eabbf82cbf3, accessed November 2016.
  9. Virginia Harrison, “Australian winemakers slap sunblock on grapes,” CNN Money, January 9, 2015, http://money.cnn.com/2015/01/09/luxury/grapes-sunblock-australia/, accessed November 2016.

Headliner statistic source: Hannah L, et al., “Climate change, wine, and conservation.” Proc Natl Acad Sci 110, no. 17 (2013): 6907–6912, accessed November 2016.

Featured image source: Virginia Harrison, “Australian winemakers slap sunblock on grapes,” CNN Money, January 9, 2015, http://money.cnn.com/2015/01/09/luxury/grapes-sunblock-australia/, accessed November 2016.

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6 thoughts on “Is Australian Wine Going the Way of the Tasmanian Tiger?

  1. While I am relieved that buying land in cooler areas of Australia is an option for wine makers, I wonder if the soil composition of those areas is as ideal for grape growing. Additionally, I am concerned that, since this cooler agricultural land is limited, it will result in a change of the landscape of Australian wine producers. Since this land is limited and in high demand, only very large, established and well-funded wine producers will be able to afford the steep prices. Presumably, this land will also be in demand from other agribusiness whose crops are affected by the increased heat of climate change. Unfortunately, it seems as though the cost of this land might result in the survival of only a few large wine makers who are able afford it. This would result in a reduction of Australian wine label diversity and increase costs being passed along to the consumer. It is a dark day indeed…

  2. Fascinating that the climate change is making some environments in Australia less suitable to growing the grapes necessary to produce wine. I am curious to know if the opposite is also happening? Clearly global warming is making previously used vineyards too warm, but is this shift also adapting environments that used to be too cold for vineyards to now becoming more suitable for grape production? Is this climate change actually decreasing the total suitable land for vineyards throughout the world, or it just shifting the land to new regions that used to be too cold? Is it a total decrease, or just a shift to new regions? Fascinating thoughts!

  3. Interesting problem I didn’t know about before! It seems like a good number of posts are about the effect of climate change on agriculture products – coffee, chocolate, etc. – so unfortunately wine isn’t the only food product that is affected by environmental changes. Should companies that produce food or drinks consider diversifying their businesses, based on the assets they already hold? Considering TWE has invested so much in land, equipment, intellectual capital, it might be worth re-purposing the land it owns for different crops or even livestock. That being said, I don’t want to be beholden to the sunk cost fallacy – if it’s time to move on to different regions, best to move on! Nonetheless, diversifying the product mix may lead to lower risk and less seasonality if different crops could be planted on different plots of land.

  4. It is so interesting to see the systematic patterns of early ripening across different wine types from 1993 to 2005.
    – The post explains well that part of the reason was due to rising temperature from climate change. However, I am wondering if there are any other external factors such as development of agricultural practice or any change in quality of resources that could also contribute to the shifting of the ripening time outside climate change.
    – No doubt that the climate change is impacting the wine industry in quite significant ways. When companies implemented these reactionary counter-measures such as better supply chain management or technology advancement, I am wondering if they are also reflecting on how their past growing practices have generated carbon footprint which indirectly exacerbates the climate change. Are the companies becoming more self-aware and become more proactive to change their production process to reduce their own carbon footprint along the way? For example, when they sell a previous wine growing land for a new one in southern and cooler areas, are there any consequences of rising carbon footprint due to such land replacement strategies?

  5. Andrew, it breaks my heart to think that I won’t be able to enjoy my South Australian shiraz or cab sav in a decade or two’s time. In addition to the very compelling solutions you offered, I can suggest two more:
    (1) Stockpile shiraz now. With careful selection of the right vintner and vintage, it should only accumulate in value! I’m less concerned about whether my grandchildren can drink shiraz, as long as I have a lifetime supply for myself then I’m happy.
    (2) On a slightly more serious note, there should be opportunity for TWE to diversify its geographic holdings into cooler regions (e.g. Tasmania or New Zealand) where grapes suited to dryer, warmer environments could thrive. Tasmania already has a wine industry in its early stages, and as an early investor, TWE could leverage the strength of its brands to build this industry over the next 10-20 years.

  6. Very interesting read. It is becoming increasingly difficult to raise crops in many of their respective natural habitats; and the risk for a luxury item like wine is much higher since the willingness to compromise the quality is significantly lower for the consumer.
    With the natural habitat of the grapes shifting, it is possible to assume that changing the production area is simply easy; however, there are two problems with that approach:
    (1) Relocating the families and the workforce who know how to run vineyards is hard
    (2) As global warming continues to distort the climate, one cannot expect shifting vineyards to be a sustainably feasible solution

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