IMPORTED WINE PRICES HURTING DOMESTICS
It’s going to take some years of recovery to get the Australian wine business back on track according to the Australian Wine and Brandy Corporation’s annual report. The current surplus – caused by overplanting in the late 1990s – has forced growers to leave up to 5% of this year’s harvest on the vines, which is double that of previous seasons. As a result, growers and winemakers can’t get rid of the juice fast enough, and are sending it in bulk to the U.S. and Britain faster than you can say “grapejuce.” So yes, export volume is higher than ever before (up 7%), but Australia exports are down 7% in the average price per liter – and it could take up to five years to reverse the trend.
How, exactly, does this phenomenon affect the U.S.? Well, cheaper imported wine makes it more difficult for domestics to compete with inexpensive, good quality imports. In Australia’s case there’s so much excess wine, they’re practically giving it away. And it doesn’t look like Australian imports are going anywhere anytime soon. Don’t believe me? For the first time an Australian import, Yellowtail (of course), became the top overall wine in dollar sales. Altogether, imports were up 5.7% in 2005 while domestics grew only 1.5% that same year.
Australian wineries are offering quality, premium brands for $15-25, a cheaper price than most domestic premium wines which usually go for $30 and up. Are domestic grape prices prepared for that kind of competition? Especially if other New World countries, like Chile, Argentina and South Africa, follow suit and offer less-expensive, good quality wines. Last year, the top five imported brands were up 11.3%, led by Australia's Yellow Tail, which gained 15.4%, or a million cases. Imports from Italy, Chile, Spain, Argentina and elsewhere all grew substantially but French imports dragged behind with a small 2.4% increase.
So, moral of the story? Globalization will continue to shape the industry, so U.S. winemakers should prepare for further competition from imports, and mold their businesses, and prices, to help ward off the opposition.
How, exactly, does this phenomenon affect the U.S.? Well, cheaper imported wine makes it more difficult for domestics to compete with inexpensive, good quality imports. In Australia’s case there’s so much excess wine, they’re practically giving it away. And it doesn’t look like Australian imports are going anywhere anytime soon. Don’t believe me? For the first time an Australian import, Yellowtail (of course), became the top overall wine in dollar sales. Altogether, imports were up 5.7% in 2005 while domestics grew only 1.5% that same year.
Australian wineries are offering quality, premium brands for $15-25, a cheaper price than most domestic premium wines which usually go for $30 and up. Are domestic grape prices prepared for that kind of competition? Especially if other New World countries, like Chile, Argentina and South Africa, follow suit and offer less-expensive, good quality wines. Last year, the top five imported brands were up 11.3%, led by Australia's Yellow Tail, which gained 15.4%, or a million cases. Imports from Italy, Chile, Spain, Argentina and elsewhere all grew substantially but French imports dragged behind with a small 2.4% increase.
So, moral of the story? Globalization will continue to shape the industry, so U.S. winemakers should prepare for further competition from imports, and mold their businesses, and prices, to help ward off the opposition.
posted at 9:29 AM
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