Why are imported wines in Australia so expensive?

For a couple of years now the Australian dollar has more or less been at parity with the USD. As it relates to the Euro, it means we can buy products from Europe with the same level of purchasing power as the American consumer. As I’m writing this article $1 AUD buys 0.80 Euro, and $1USD buys 0.79 Euro. That makes it very easy to compare the costs of imported European wine in both Australia and the US, and as such I am consistently amazed and disheartened to see what a difference there is in what an American pays for a Barolo, Bordeaux, or Burgundy as compared to what we pay. Below are some examples with more or less average prices in each country -



I’ve tried to pick a reasonably random selection of European wines. Different countries, regions, and producers. I’m sure there can be argument over whether the price I have for each wine is truly the average in each country but they would be arguments about $5 here, maybe $10 there. What the above charts shows is a consistently more expensive price for the Australian consumer. What explains this difference? In a word, tax. On an imported wine in Australia there are the following taxes

5% Duty
29% Wine Equalisation Tax
10% GST

Apparently occasionally there is another 5% from customs for “transport and insurance”. I can’t profess to know too much about US taxes, and there may be some non-tax related factors at play, but it is quite obvious when looking at the chart that taxes are the main difference in the cost of European wines in Australia as compared to the US.

At 29%, the main issue is the Wine Equalisation Tax (WET). It’s a controversial tax even in terms of its effect on local wine, but when it comes to imports it is ultimately a protectionist tax that makes imports more expensive relative to local wine. Local wines are subject to the 29% WET tax, but local producers are also entitled to a rebate of 29% on the wholesale value of their wine sales. An imported wine just has the 29% tax applied, with no rebate. The ultimate effect is that local wines are cheaper than imports on a like for like basis. (As an aside, at a local level, this is also an example of wonderful bureaucratic waste and tax inefficiency. We’ll tax your product at 29%, have that money cycled through a bureaucracy with all the embedded costs that come with that, and then we’ll basically give you that money back to you as a rebate.)

As with any protectionism it’s ultimately counterproductive and wasteful in the long term. Australia has become a prosperous nation over the past 3 decades in large part because of our reduction in tarrifs. Australia has among the lowest level of tarrifs and protectionism of any OECD country. Unfortunately some patches still exist. One ridiculous example is the luxury car tax, which sees a 33% impost on top of any imported car worth about $55,000 or more. Another is the WET.

People will talk about supporting local industry, but the wine industry shouldn’t be protected. It should survive and thrive on its own merits.

The quality and character of a segment of Australian wine at present is fantastic. However, there is still plenty of uninspiring gear out there. Greater competition from imports would in fact only be a good thing for even further improving the quality of wine we produce. Imagine a world without this irrational WET tax. The imported wines we drink would be significantly cheaper. Burgundy, Bordeaux, and Barolo all significantly cheaper. If I’m an Australian winemaker producing a Cabernet, Pinot, or Nebbiolo, in order to compete with these imports, I’m going to have to ensure I have a compelling story, compelling wine, or ideally both. Uninspiring wine is more likely to be squeezed out.

I appreciate that there are real people at the end of this equation. Wonderful, passionate wine people, who make great wine, and who are struggling in this time of oversupply and a strong Australian dollar. The rebate might be the only thing currently keeping them afloat. However, coming back to my earlier point about the reduction in protectionism in Australia over the past few decades, individuals would have suffered with each industry where tariff cuts have occured. And yet the long-term result has been a massive positive for this country. I see it as being no different in the long term for Australian wine. Moreover, in 2012, there is a quality, uniqueness, and confidence with Australian wine that should not require government subsidy or protection.

And on the other side of that coin, many importers are doing a wonderful job in bringing in some fantastic and unique wines. Wines that provides both a reference point and a point of difference. At the end of the day, all anyone should ever ask for is a level playing field, and as such we should be paying a lot less for imported wine.


Red


* Postscript: To perhaps clarify my position further as to what the alternative might be to WET, I believe that if there has to be a tax of this sort then some kind of volumetric tax would be a far better set up for both local producers and imports. I've touched on this in the comments section, but it is worth another entire piece in itself.

Red's Xmas Wines

Time with family, gorging on wonderful food, and imbibing great wine. That is what Christmas is to me and it’s a time of year I always look forward to. This year has been no exception.

Jacquesson Cuvee no. 734 Champagne – Disgorgement 2 quarter 2010 – Drinking beautifully with fine acidity, strawberry fruit, and a beautiful creaminess. Power and finesse.

2006 Franck Bonville Blanc de Blancs Champagne – A nice change up from the Jacquesson and of equal quality. More taut and with more prominent acidity. Lovely citrus and yeasty flavours. Great length.

Both Champagnes were a hit and while different, people generally found it difficult to split the two

2008 Grosset Polish Hill Riesling – not sure if this is a representative bottle as it was surprisingly developed and forward, compared to when I had this a year ago. The toast, honey and kero that often come with an aged Riesling were already apparent on this occasion. As such it was actually drinking beautifully, having moved into a more generous stage of its life, and was consumed with great gusto. I will be interested to see what future bottles bring to the table

2009 Freycinet Pinot Noir – the great thing about this wine is that it works for both pinotphiles and punters. Around the table at Christmas lunch it was universally enjoyed, and yet undoubtedly this wine had the balance, length, and inherent complexity to age beautifully. Enticing aromas of dark cherry, spice, and forest floor lead to a generous yet refined palate that doesn’t let up through a long finish. Loved drinking this, and envisage loving my other bottles over the next decade. With succulent Turkey, stuffing, gravy, and cranberry sauce it was just the ticket.

2006 Charles Melton Grains of Paradise – I’ve had a lot of great Barossa Shiraz of late, that finds that balance between the inherent power it brings to the table and a sense of restraint and elegance, and personally I’m loving it. This is yet another example. Relatively medium-bodied within its style, there is an intoxicating cedar and spice to this wine that really won me over. Beautiful fruit flows through a long finish. Superb.

Morris Cellar Reserve Grand Liqueur Muscat – liquefied dark chocolate. Yes it’s much more than that, with some lovely nutty notes providing some balance, but the overall impression is one of complete decadence. It went wonderfully well with a plum pudding, and afterwards I needed a nap . . .



Red

It's still early in my Bordeaux journey . . .

I’m yet to drink a lot of top Bordeaux, namely because on any regular basis I can’t afford it. While a one off splurge of $200-$300 for a bottle of wine might be fine, doing it on any regular basis or buying half a case of something is not really a sane amount of money for me to be spending, especially if I want to buy wines from other wine regions as well.

In spite of this, I have always wanted to drink more top Bordeaux, and this year through a number of different opportunities and tastings, I’ve drunk far more fantastic Bordeaux than ever. A few First Growths, in Latour and Mouton Rothschild, and a number Second Growths like Rauzan Segla and Montrose, and some right bank stars like Chateau Vieux Certain, have all been in the mix. Below is a collection of thoughts and notes from some of these different tastings

- High acidity – while I’d read about it, and experienced it to some extent previously, I’ve nevertheless loved the high levels of natural acidity in Bordeaux wines I’ve tried of late. Some 15 year old Bordeaux that i tried greatly impressed me with an acidity that was still very prominent (in a positive way). While the ageworthiness of Bordeaux is legendary, it has been nice to actually experience the acidity upon which this is based. As impressive and ageworthy as many Australian Cabernets from places like the Margaret River and the Coonawarra are, it is perhaps more evident to me now than it has been previously why the very best Bordeaux goes that extra mile.

- Savoury profile – with Australian wine the prominence of fruit is almost never in doubt. What is in question, and what sorts the wheat from the chaff, is whether there is a savoury complexity to compliment that naturally powerful fruit. With Bordeaux it more or less seems to be the opposite. A savoury flavour profile is almost a given, with classic tobacco, cigar box, and pencil flavours very much the norm. What is more variable is the generosity of fruit. For me the better Bordeaux are predominantly savoury but nevertheless have beautiful fruit in tow.

- 2009 vs 2010 – 2009 has been lauded by a number of prominent Bordeaux critics, including Parker and Suckling, as near enough to the finest vintage of their lifetimes. The 2010 vintage has also gained plenty of praise as a wonderful vintage, but at this early stage seems to be playing second fiddle to 09 in terms of reputation. I was fortunate enough to attend a tasting where I was able to try a number of right bank wines from both vintages. The two highlights of the tasting were the 09 and 10 of the Chateau Vieux Certan from Pomerol and Chateau Pavie Macquin from Saint Emilion. For me the ‘10s were actually the better wines. Both vintages looked very impressive, with the 09’s quite rich and powerful. The 10’s however looked fresher and more balanced. In particular the 2010 Chateau Pavie Macquin looked stunning. It’s admittedly a very small sample to be drawing conclusions about these respective vintages, though they would seem to align with descriptions that I’ve read, with 2010 being considered by many to be a more classic vintage than the riper 2009.



Some tasting notes on some aged Bordeaux

1996 Chateau Montrose – Saint Estephe (65% Cab Sav, 25% Merlot, 8% Cabernet Franc, 2% Petit Verdot) - this is a wine that feels fully integrated, but is still very primary, and has many years in front of it. It has a beautiful, floral nose along with some amazing exotic spices. To drink it is a bit of “wow” wine, with beautiful cassis fruit, fantastic drive through the mid-palate, and impressive length. Some lovely secondary notes of sweet leather indicate where this wine is heading.

1996 Chateau Rauzan Segla – Margaux (54% Cab Sav, 41% Merlot, 4% Petit Verdot, 1% Cab Franc) - A beautifully balanced wine. It’s a touch less expressive and powerful than the Montrose, but no less impressive. Great tannins. Lovely tobacco notes linger on a long finish.

1996 Chateau Haut Batailley – Pauillac (65% Cabernet Sauvignon, 25% Merlot, 10% Cabernet Franc) - At 15 years of age this wine has a wonderful intensity of primary fruit that just puts a smile on your face. Not without a sense of elegance and restraint this is nevertheless a rich and tannic Bordeaux. Leather and cigar box adding beautiful savoury complexity. Many years ahead of it.


As discussed at the beginning of this post, cost is the only issue with these wines, however, I have seen enough, particularly in the past year or so, to know I should be making the occasional strategic splurge with these most ageworthy of wines.


Red

2010 Henry Fessy Beaujolais-Villages

When purchasing a $15 Beaujolais-Villages all I’m really hoping for is a light, enjoyable quaffer. This wine, however, delivers a whole lot more than this.

The Fessy family have had wine interests in Beaujolais since 1888. They’ve obviously had some success since that time, currently producing Beaujolais from all the main Crus in Beaujolais as well as this Villages wine. Speaking of which, having had a look at the technicals, there is an average vine age of 50 years for this wine, and the fruit is hand picked and sorted at vintage. It’s perhaps not surprising then that it has more to offer than just as a quaffer.

An expressive nose of dark cherry, flowers, and spice is particularly enticing. While still being a light red wine, on the palate there is more power and fruit richness than one might expect from a Beaujolais-Villages. There is a nice line of acidity and lovely latent earthiness that emerges as the wine breathes, opens up, and delivers a savoury, sour cherry finish.

You can do the whole chilled Beaujolais thing with this wine this summer if you want, but you’ll get more out of it if you let it breathe and warm up a touch. And indeed you could pop it in the cellar for a few years if you wanted to. The florals might be a give away, but I’d hazard a guess that this would often be mistaken for a decent Pinot Noir in a blind line up.

A great value wine and the winery’s logo is a bloke with a tash. What more could you want?

Rated:


RRP: $15
ABV: 12.5%
Website: http://www.henryfessy.com/


Red