Counting the cost

As acres and acres are given over to vines, the future wine surplus could be hard to swallow

If you're considering a change of career at the moment, you could do worse than set up a grapevine nursery. So many people are planting vineyards these days, especially in the New World, that supplying them with vines and rootstocks would be an easy way to make money. I'm surprised that Richard Branson hasn't thought of it; Virgin Vines would be a lot more profitable, and a lot less hassle, than Virgin Trains.

Producers in Australia, South America and California are planting vineyards at manic rates, ignoring the old adage that the only way to make a small fortune in the wine business is to start with a much larger one. Everywhere you look, people are clearing scrub, bulldozing topsoil and dynamiting hillsides. Australia has added 100,000 new acres in the past three years, while on the West Coast, vineyards of Chardonnay and Cabernet Sauvignon have doubled over the same period. All these grapes will eventually be turned into wine, so watch out for the tidal wave.

One considered estimate is that the New World's wine surplus could be bigger than the European Union's by 2005. Unless the Chinese start drinking wine, or Aussie Shiraz is found to be more effective than Viagra, there's going to be a huge quantity of unsold wine sloshing around before long. You don't need a PhD in economics to predict that prices are going to fall.

We're already seeing the first signs of this in British supermarkets, with one well-known Aussie brand being sold at cost last month. Great, I can hear some of you thinking, lots of cheap plonk for everyone. Well no, actually. I'm as happy as anyone to go truffling for bargains, which is why I enjoy sherry, sweet Loire whites, Languedoc reds and German Rieslings, but I won't be applauding the return of the £1.99 bottle. Really cheap wine does no one any favours: the producer, the retailer and ultimately the consumer are all losers. Everyone thinks short term and, in the end, quality suffers.

To compete with some of these deals, producers in the Old World will be forced to cut costs, and probably corners, or lose sales. Will Spanish producers resist the temptation to blend bulk Argentine Tempranillo with their own wines? And what about the French? Don't bet against the European Union playing dirty: a piece of legislation here, the discovery of an illegal additive there.

The world-wide surpluses won't affect fine wine producers - the best wines of Bordeaux, Burgundy, Champagne, Piedmont and the Douro Valley will continue to sell at high prices. They're made in restricted quantities and the laws of supply and demand apply here, too. I wish I could say the same thing about the rest of the wine business, which is facing a massive shake-out. Perhaps that nursery isn't such a wise investment after all.

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