Crisis warning for Australian wine industry
May 5, 2006 - Tessa Edbrooke - Decanter.com

Australian wine export prices have dropped by a third since 2002, a new survey reports this week.

Oversupply of grapes, and wineries being squeezed by increasingly powerful retailers are blamed for the slump, the 2005 Deloitte wine survey reported this week.

Producers must become more commercially aware, Deloitte partner Gary Doran warned. He said only 'real structural change' would save many wineries from going out of business.

'Winemakers must start thinking beyond the farm gate and replicate the tactics used by other fast-moving consumer goods,' he said.

This has been echoed by producers. Michael Bolland, manager of boutique label Red Hill Estates, told the Melbourne Age, 'Far too many smaller operators don't understand their cost base, and there is no question that some players are going to go to the wall.'

However the success of brands like Casella Wines' Yellow Tail label in the US market shows that there is still some fight left in the formidable Australian marketing machine.

US consumers have fallen in love with the brand's low prices and immediately recognisable kangaroo logo. The partnership between the Australian vineyard and US distributor William J Deutsche & Sons has seen sales rise from 225,000 cases in 2001 to more than 7.5m cases in 2005.

Doran said: 'Like many industries before them, the wine industry is evolving and developing and where there is change there is usually enormous opportunity.'
At the same time, the Sydney Morning Herald reports that Wine Grape Growers' Australia estimates 1800ha will be planted in the Riverina region in New South Wales, Barossa Valley and in Western Australia this year - some of which is not tied into contracts.

The country already has about 164,000ha under vine, and winemakers are responding to the glut by reducing their take of grapes from growers.
And the Australian Bureau of Agricultural and Resource Economics predicts prices for the country's wine grapes will fall by about 5% to AUS$522 a tonne for white and to $413 a tonne for red for the 2005-06 vintage.