Supply chain disruptions show no sign of abating

As freight and shipping disruptions persist, industry bodies Australian Grape & Wine and Wine Industry Suppliers Australia Ltd (WISA) are urging businesses to plan early and work collaboratively to counteract the challenges being faced.

"Costs are increasing dramatically across the board and it’s proving very difficult to access spots in containers. This will have an impact on our exports in the short-to-medium-term," said Tony Battaglene, Chief Executive of Australian Grape & Wine. 

Grape and wine businesses are also facing significant delays on many of the inputs they need ahead of Vintage 2022. The complexity of this is illustrated in the graphic from WISA below.

“This is a complex global problem without any easy solutions,” said Mr Battaglene, “We’ll keep working to explore potential remedies, but in the meantime we need to work together to understand the impacts of these cost increases and delays and engage with our supply chain partners in an empathetic and collaborative way.”

In Australian Grape & Wine's Pre-vintage Briefing on Thursday, Mr Battaglene painted a picture of an industry under pressure.

Firstly to China. Mr Battaglene said that even with the WTO process in motion, there is no expectation that the situation will right itself in the short to medium term.

"They have long memories and it is a difficult market to get back into, once you are out," said Mr Battaglene.

The freeze in trade relations between Australia and China has led to an over supply of red wine due to the effective shut down of exports due to tariffs. However, white wine exports remain relatively stable as it was not exported to China in the same quantities.

Independent grower, Jim Caddy, of Inland Regions Wine also noted that much of the wine that had been destined for China is not suitable for new international markets like Europe given its higher alcohol content.

To Europe and Mr Battaglene pointed to the broken submarine agreement with France which has now frozen any progress in Australia's free trade agreement negotiations with Europe with talks not expected to resume until February 2022.

Mr Caddy also described the decrease in wine consumption in Europe along with a highly subsidised wine market as an additional challenge for Australian wine exports.

Ben Mislov, Group Development, Flinders Logistics expects that domestic and international freight problems will continue to play out for another year at least and freighting costs are expected to go higher.

Mr Mislov said that industrial disputes in Australia continue to disrupt supply chain and that ports around the world all continue to experience labour shortages as travel restrictions and hesitancy continues and that COVID outbreaks continue to close down ports for one or two weeks at a time.

Shirley Fraser, Executive Officer of WISA agrees that it has never been more important for grape growers and winemakers to be talking to their suppliers as early as possible ahead of the coming vintage.

“We want to make sure all businesses understand how major this impact will be so that we can start working together to manage the potential problems ahead of us,” said Ms Fraser.

"In preparing for next vintage, businesses cannot rely on taking the usual just-in-time approach to securing the inputs they usually rely on”. 

Australian Grape & Wine and WISA have a diverse network of members in logistics, importing and advisory, and welcomes contact for those in need of connection to solutions and referral to key contacts.

Email Executive Officer WISA Shirley Fraser here.