SIPPING IN THE YARRA VALLEY | April 8th 2008

Allerina & Glen MacLarty/Flickr

A day of reckoning has come to Australia's wine market, writes Robert Milliken. After two years of bust, vintners are struggling. He heads to the Yarra Valley, where some of the best wine is created, to see how the wineries are faring ...

I am trying to spy a platypus, an elusive Australian aquatic mammal said to reside in the Yarra River, with little success. I'm in the Yarra Valley, a stunningly beautiful region about an hour's drive north of Melbourne, for a family friend's wedding (the area has grown increasingly popular on the wedding circuit). But for most visitors, native wildlife and marriages seem to come second to the Yarra Valley's finest and most enduring production: wine.

Wine from the Yarra Valley has been a star performer in a burgeoning industry. Australian wine's export-revenues have quadrupled since 1997; Britain, America and Canada-the most competitive countries for wine sales--are Australia's three top customers. But as with the 19th-century gold rush (which was centred just north of Yarra), and more recent Australian mining booms, a day of reckoning has come.

Spurred by a seemingly endless demand for Australian wine, new and unlikely players rushed to plant more grapes. By 2006 the market was saturated, grape prices had fallen, and much of the wine could only be sold at the cheap end of the world's bulk-wine market (if at all). For a country that wanted to challenge New Zealand and California for the New World's viticulture crown, the last two years have been disastrous.

As the industry ponders how to recapture its reputation for quality rather than quantity, my work is taking me through some of Australia's leading wine regions. I am going both to taste the wines and to see how their vintners are faring.

I am more a wine lover than a wine expert (perhaps not unusual for a journalist). I understand the difference between an excellent wine and a bad one, but terms like chocolate, strawberry and red-currant, when used to describe a wine's palate, mean little to me. As a journalist, I am most interested in the stories of the people who plant the grapes and turn them into wine.

Yarra Valley wineries account for just 2% of Australia's grapes, but they produce some of the country's best wine.

Ahead of the Saturday evening wedding in a giant 1860s barn (now called Stones of the Yarra Valley) I join my sister for lunch at Domaine Chandon, one of the valley's showpieces, and one of only four wineries Moet & Chandon have established outside France.

The company chose the Yarra Valley over the bigger Australian wine regions in South Australia and New South Wales for its cool climate and the two grapes for which it is renowned: chardonnay and pinot noir, the core varietals for champagne and other sparkling wines. Like Moet & Chandon's other wineries in California, Brazil and Argentina, this one was initially set up for the local market, but, on the back of strong sales, Yarra Valley's Chandon bubbly is now exported as well.

Chandon's cavernous restaurant is buzzing. The barbecued seafood accompanied by a glass of sparkling wine, and the view across sun-kissed vineyards to the mountains surrounding the valley, are exquisite. It reminds me how recently Australia became a wine country.

In my rural Australian childhood, most adults drank whiskey and beer. Grape has replaced grain over the past 30 years thanks largely to the European immigrants who started pouring into Australia after the second world war, changing tastes in both food and wine.

The De Bortoli family (originally from Italy) own Australia's sixth-biggest wine company in an industry gradually being absorbed by conglomerates. Steve Webber, who established the De Bortolis' Yarra Valley winery, is one of Australia's leading winemakers; these days he rises at 3am to oversee the harvest.

I ask Steve where the industry's future lies after its recent distress. "Australian wines used to be seen as very safe," he replies. "But we can no longer compete on price alone. We have to be more clever, and make more interesting wines."

This may also mean re-thinking the standard Australian formula of blending grapes from different regions, and looking instead to the French idea (often derided among Australian winemakers) of terroir: that a wine's character ought to reflect the soil and climate of one particular place.

I wonder if other winemakers on my journey will agree.

(*This is the first instalment of a diary on Australia's wine country, published on Economist.com. Robert Milliken is the Australia correspondent for The Economist.)