VOLUME LOSS INEVITABLE FOR AUSSIE EXPORTS
After attending the 2007 Australian Wine Industry Outlook conference, analyst Andy Kovacs of Macquarie Research said the Australian wine industry is “hazy at best” in a research note. Let’s take a look at the highlights.
Andy notes that Lawrie Stanford from the AWBC is predicting a 2008 crush of 1.22mt, which is supported by other industry participants. The 2009 crush is likely to be smaller at 1.16mt, while 2010–2012 is expected to be constrained (just 1.8mt by 2012). Water reserves in the warm inland regions are at critically low levels and are likely to take 4–5 years to recover.
As Andy puts it, volume shortfalls will impact sales. It’s true that the current surplus from past harvests will help make up for a lower 2008 yield, but the Australian wine industry still expects to move into under-supply during fiscal 2009. Imports will help fill the gap domestically, but some export sales are likely to be lost.
Faced with volume shortage (and related grape price inflation) selling price increases will be necessary to protect profits, says Andy. Australian wine export prices are increasing for the first time in five years, although he notes that some local industry participants are showing a reluctance to take price increases.
But the question remains, how will international consumers react to more expensive Australian imports? As Andy points out, Australian wine gained popularity globally because of its perceived value, including quality, approachability and affordability.
“The challenge of lifting export prices therefore shouldn’t be under-estimated,” said Andy.
At the conference, Dan Jago, Tesco’s director of beer, wines and spirits, suggested that while Australian wineries may want to implement price increases, consumers will ultimately decide whether to accept them. As a solution, Australian wineries need to strengthen their equity in order to support price increases.
Andy notes that Lawrie Stanford from the AWBC is predicting a 2008 crush of 1.22mt, which is supported by other industry participants. The 2009 crush is likely to be smaller at 1.16mt, while 2010–2012 is expected to be constrained (just 1.8mt by 2012). Water reserves in the warm inland regions are at critically low levels and are likely to take 4–5 years to recover.
As Andy puts it, volume shortfalls will impact sales. It’s true that the current surplus from past harvests will help make up for a lower 2008 yield, but the Australian wine industry still expects to move into under-supply during fiscal 2009. Imports will help fill the gap domestically, but some export sales are likely to be lost.
Faced with volume shortage (and related grape price inflation) selling price increases will be necessary to protect profits, says Andy. Australian wine export prices are increasing for the first time in five years, although he notes that some local industry participants are showing a reluctance to take price increases.
But the question remains, how will international consumers react to more expensive Australian imports? As Andy points out, Australian wine gained popularity globally because of its perceived value, including quality, approachability and affordability.
“The challenge of lifting export prices therefore shouldn’t be under-estimated,” said Andy.
At the conference, Dan Jago, Tesco’s director of beer, wines and spirits, suggested that while Australian wineries may want to implement price increases, consumers will ultimately decide whether to accept them. As a solution, Australian wineries need to strengthen their equity in order to support price increases.
posted at 11:01 AM
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