As the few readers of this blog would know, I enjoy wine, particularly red wine. I also own shares in Treasury Wine Estate, the main (virtually sole) wine company publicly listed on the ASX.
Last week, I went to a winery dinner at a pub in South Melbourne. The convenor of the Bottle Club I regularly attend is close friends with the owners of a family owned Barossa winery, and arranged for tickets for us to go to this dinner.
It was a very convivial evening, and the winemakers were very generous with refills of their two flagship red wines (which have a recommended retail price of over $200 per bottle).
After the cheese platter was served and people were standing around chatting, glass in hand, I approached one of the owners along with my friend. I asked about how it was that Treasury had lost 30% of its share price in the past 6 months, and Australian Vintage Group (a relative minnow on the ASX) had lost over 80% of its share price in the past three years.
His reply was as sobering as it could be for an investor in the wine industry who had happily had his two glasses refilled several times over the course of the evening. He said that industry conditions were the toughest he had seen since his teenage years, when the vine pulling program had gone into effect. In fact, conditions were tougher than when the vine pulling happened.
I had been vaguely aware of the vine pulling program, which gets alluded to in various of the books on Australian wine and its history which I have read. But I had not really thought about it too much. After all, in 1987 when it happened, I was a silly 18 year old blundering into adulthood and making my fair share of dumb decisions.
The vine pulling program was a South Australian government initiative to subsidise the removal of uneconomic grape vines in 1987, a time when the wine industry was on very hard times. As a result of this, we lost a lot of ancient vines which might have been used to produce some very high quality wines (FYI, old vines produce less fruit, but of much higher quality).
Knowing that times are tougher now in the wine industry than they were almost 40 years ago is not great news. Not only am I a nominal investor in the wine industry, but I feel a great connection with and affinity to the industry and to winemakers generally (I am an amateur wine maker after all). When they suffer, it makes me feel sad.
And even though I have limited skin in the game, watching Treasury’s share price drop under $8 this morning was not a pleasant experience.
Lost For Words! 