by James Halliday and Joel B. Payne
In the twelve months to the end of September 2006 Australia s wine industry surpassed its previous export record in volume. According to the Australian Wine and Brandy Corporation in Adelaide 749 million litres of wine were shipped
over that period, a nine percent increase over last year. During that same time, though, value fell slightly for the first time in 15 years to A$2.78 billion, attributable to a 7% decline in the average price per litre.
Australia is currently the world s fifth largest wine producing country after France, Italy, Spain and the United States, but surpasses the latter to take fourth place in export volumes. Australia exports wine to over 100 countries and is the market leader in the United Kingdom, Ireland and New Zealand. While exports to Ireland, Denmark and Ireland rose significantly, Russia, Asia and Eastern Europe continued to build on a much smaller base.
Nonetheless, the market is not as upbeat as the figures might suggest. Although a sustained draught and now frost may ultimately reduce the volume of unsold wine by limiting production, the current surplus is estimated at 500 million litres by the AWBC. Analysts predict that it will take another two years to achieve a state of supply balance. Until then complaints of low margins, in particular in the highly competitive English market, are not likely to fade. At the same time, unless key Australian wineries can cut costs in order to produce wine more cheaply, many predict that demand will shift elsewhere.
