AUSTRALIANS CAN’T CATCH A BREAK
If it’s not one thing, it’s another. As a country that exports 53%of its production, Australia depends heavily on global sales, particularly exports to the UK and US. But recently several factors have turned against Australia, including currency, severe drought and, some would say, complacency. Let’s take a look at some of the overriding issues the land down under faces today.
AUSTRALIAN DOLLAR IS UP, UP, UP. Cheaper exports – we’re talking price, not quality – has always been one of Australia’s key selling points. However, the nation’s currency is at a 23-year high while the US dollar is depreciating daily, which means Australia may soon lose its price advantage. Good news for domestic wineries, but not good news for importers.
At first, rising prices looked like a good thing after many Australian growers and wineries lost loads of money at the hands of cheap bulk exports, a result of repeated grape gluts. However, a rising Australian dollar coupled with a devastating drought may take prices a little higher than the industry had planned.
Australian wineries face two options. One, they can cut profit margins and keep brands competitive, or two, companies can raise prices and risk losing market share of wine exports. If Australian prices go up, cost conscious consumers can always turn to Chilean wines or other inexpensive imports to take its place. Some Australian vintners may eventually follow in the footsteps of Lindemans’ Country of Origin Range and outsource their grapes for exports to the U.S. and Europe. The Lindemans label now includes Chilean and South African wines.
The Winegrape Growers of Australia (WGGA) says the cost of grapes from the 2007 harvest rose 5% from the previous year. Average prices per bottle rose 2% in 2007, the largest increase in eight years and the first since 2003.
DROUGHT PUTS A DENT IN THINGS. For a long time Australians had too much wine and it’s all we ever heard about. Now, producers worry they won’t have enough.
As a quick refresher, the 2008 vintage is expected to be as low as 800,000 metric tons, about 43% less than the 2007 harvest (1.4 million tons), and as high as 1.3 million tons.
The drought has left many growers with little water for their vines, particularly in the Murray River Basin, with water reserves at only 20% of capacity. As you’ll recall, about 70% of Australia wine is grown in the Murray-Darling region. Growers are still smarting from recent next-to-nothing grape prices and are unable to pay for expensive water. As a result, some growers have already cut down 30% of their vines. The WGGA reported earlier this month that as many as 1,000 of Australia’s 7,500 winegrowers are likely to leave the industry in the short term.
TURNING A DEAF EAR TO CONSUMERS. So what about complacency? An article last week by Mark Ritson, an associate professor of marketing at Melbourne Business School, accuses Australian producers of being “in grave danger of suffering from a fatal case of strategic amnesia.” He draws this conclusion after witnessing several Australian vintners dismissing the advice of Dan Jago, the director of beer, wine and spirits for British supermarket Tesco, at the Winemakers Federation of Australia's annual outlook conference in Melbourne.
“Tesco is a retailer that has put extraordinary consumer understanding at the heart of everything it does,” writes Ritson. “If Jago tells Australian wine producers they need to change, it is not the personal opinion of an arrogant Pom; he is speaking for a market he knows infinitely better than any Australian winemaker does.”
In all, Jago accuses Australian wine producers of complacency and failing to listen to the ever-changing demands of the almighty consumer. He challenges them to make their wines lighter and more refreshing, and pointes out that if they don’t, other countries such as South American will beat them to the punch.
AUSTRALIAN DOLLAR IS UP, UP, UP. Cheaper exports – we’re talking price, not quality – has always been one of Australia’s key selling points. However, the nation’s currency is at a 23-year high while the US dollar is depreciating daily, which means Australia may soon lose its price advantage. Good news for domestic wineries, but not good news for importers.
At first, rising prices looked like a good thing after many Australian growers and wineries lost loads of money at the hands of cheap bulk exports, a result of repeated grape gluts. However, a rising Australian dollar coupled with a devastating drought may take prices a little higher than the industry had planned.
Australian wineries face two options. One, they can cut profit margins and keep brands competitive, or two, companies can raise prices and risk losing market share of wine exports. If Australian prices go up, cost conscious consumers can always turn to Chilean wines or other inexpensive imports to take its place. Some Australian vintners may eventually follow in the footsteps of Lindemans’ Country of Origin Range and outsource their grapes for exports to the U.S. and Europe. The Lindemans label now includes Chilean and South African wines.
The Winegrape Growers of Australia (WGGA) says the cost of grapes from the 2007 harvest rose 5% from the previous year. Average prices per bottle rose 2% in 2007, the largest increase in eight years and the first since 2003.
DROUGHT PUTS A DENT IN THINGS. For a long time Australians had too much wine and it’s all we ever heard about. Now, producers worry they won’t have enough.
As a quick refresher, the 2008 vintage is expected to be as low as 800,000 metric tons, about 43% less than the 2007 harvest (1.4 million tons), and as high as 1.3 million tons.
The drought has left many growers with little water for their vines, particularly in the Murray River Basin, with water reserves at only 20% of capacity. As you’ll recall, about 70% of Australia wine is grown in the Murray-Darling region. Growers are still smarting from recent next-to-nothing grape prices and are unable to pay for expensive water. As a result, some growers have already cut down 30% of their vines. The WGGA reported earlier this month that as many as 1,000 of Australia’s 7,500 winegrowers are likely to leave the industry in the short term.
TURNING A DEAF EAR TO CONSUMERS. So what about complacency? An article last week by Mark Ritson, an associate professor of marketing at Melbourne Business School, accuses Australian producers of being “in grave danger of suffering from a fatal case of strategic amnesia.” He draws this conclusion after witnessing several Australian vintners dismissing the advice of Dan Jago, the director of beer, wine and spirits for British supermarket Tesco, at the Winemakers Federation of Australia's annual outlook conference in Melbourne.
“Tesco is a retailer that has put extraordinary consumer understanding at the heart of everything it does,” writes Ritson. “If Jago tells Australian wine producers they need to change, it is not the personal opinion of an arrogant Pom; he is speaking for a market he knows infinitely better than any Australian winemaker does.”
In all, Jago accuses Australian wine producers of complacency and failing to listen to the ever-changing demands of the almighty consumer. He challenges them to make their wines lighter and more refreshing, and pointes out that if they don’t, other countries such as South American will beat them to the punch.
posted at 12:33 PM
<< Home