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Australia Still Making Too Much Wine

A vineyard in the internationally renowned Margaret River wine region
© AFP | A vineyard in the internationally renowned Margaret River wine region
When will Australia learn that you can have too much of a good thing?

A bountiful 2013 harvest in Australia will cause prices to fall, as supply continues to outstrip demand.

The Winemakers’ Federation of Australia (WFA) announced that 1.83 million tonnes of grapes were crushed during the 2013 vintage. The figure represents an increase of 170,000 tonnes, or 10 percent, compared to 2012 and is well above the six-year average.

The WFA’s chief executive, Paul Evans, said: “Following a number of lower vintages, the 2013 crush reminds us that the production potential of the Australian industry remains too high and is not in balance with local and international demand for our wine."
The oversupply is expected to push prices down, he warned. “The large crush is likely to result in higher inventory levels and bulk wine exports. It will place further downward pressure on prices and profitability throughout the commercial wine segment over the coming vintage."

While grape prices increased by an average of 9 percent compared to 2012, this trend might be difficult to sustain in 2014, as the market responds to the higher than expected 2013 crush and bloated stock levels.

In 2012, Australian wine exports grew 3 percent in volume but fell 2 percent in value, as a result of rising bulk sales and falling bottled wine sales – particularly in its two major export markets, the United Kingdom and the United States.

WFA president Tony D’Aloisio admitted that the increase in the 2013 crush had not been matched by a lift in demand for Australian wines.

"While the recent decline in the value of the Australian dollar is welcomed and an emerging global shortage may help bulk wine prices in the longer term, the sustained recovery of lost volume in international markets at profitable price points will require a concerted effort from both individual companies and the industry on a number of fronts,” he said.

D’Aloisio believes the answer is to re-engage with consumers, distributors and industry gatekeepers in Australia's key export markets.

"Locally, we need to improve margins in a highly consolidated retail market, anticipate emerging consumer trends, and take back share from imports,” he added.

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