Global demand hurt by financial crisis; shipments down 18% by value in 2008
Reuters 22 January 2009
From a picturesque hill overlooking the hazy distant foothills of Australia’s eastern ranges, Bruce March can see a crisis facing the country’s A$2.4 billion (S$2.39 billion) wine export industry with crushing clarity.
Mr. March, chief winemaker at Doonkuna Winery, in prized, cool climate vine country north of Canberra, had been looking forward to a bumper 2009 harvest, tripling production capacity last year in anticipation of rocketing China demand for his wine.
But the global financial crisis has exploded that interest, bringing with it a soul-searching for Australia’s vignerons, ironically when good rains and a late summer are set to yield one of the best harvests for years.
‘We set up to produce all this wine. We spent a lot of money, and then bang, the financial crisis hit us,’ Mr. March tells Reuters, standing near his largely new winemaking plant. ‘Our Chinese importer is hoping for a better next year. Right now, we’re tightening belts and we’re into survival mode.’
The latest export figures are depressing reading for Australia’s wine industry, which for decades led the so-called ‘New World’ challenge to wine’s traditional French, German and Italian strongholds.
Australia shipped 11 per cent less wine by volume and a whopping 18 per cent less by value in 2008, delivering the first setback for 15 years, according to government marketing agency Australian Wine and Brandy Corporation (AWBC). The average litre value of wine sold fell 7.6 per cent to A$3.53.
In key British markets, total value slumped 18 per cent, while in the US, exports fell over a cliff, slumping 26 per cent. Rare bright spots included China, which imported 32 per cent more Australian wine by value, off a low base, as well as Hong Kong (up 17 per cent) and Japan (up 4.1 per cent).
A few hills distant from Doonkuna, Tim Kirk now sees a reckoning facing the industry in the wake of what even optimistic marketers admit has been a very disappointing year.
‘We have had massive success with an approach of good wine, good price, cheap and cheerful, sunshine in a bottle. But in some respects, that’s been the seeds of our undoing,’ Mr. Kirk says.
His Clonakilla winery sits at the boutique end of Australia’s wine market and his reds, in particular an award-winning shiraz- viognier, have won international acclaim.
‘Rather than compete on good wine, great price, we need to focus on regionality, on great wine at maybe a good price,’ says Mr. Kirk, whose father began Clonakilla in 1971.
Australia exported 62 per cent of its wine in 2008 and in some markets, the percentage sold on promotion was above 80 per cent as the country looked to repeat 2007’s A$3 billion export high milestone. The average for France is around 40 per cent.
The industry is by some estimates 20 per cent too large with many newcomers having entered expecting an export bonanza.
That has harmed the image of Australia’s overall wine brand, says Paul Henry, AWBC general manager of market development, making it synonymous with low price in key markets such as Britain, and some parts of North America.
‘The real inconvenient truth for Australia is that we are not the best placed in the world to compete on volume or price alone,’ he says.
Greg Corra, who ships the top end of Australia’s wine to 32 countries from a small farm outside the capital Canberra, says that many large Australian winemakers have themselves to blame as they look for ways to cork an export crash.
‘Yes, there is a financial crisis. But the ones who are suffering the most are the larger producers who have allowed the quality of their products to decline in a bid to meet demand in the good times,’ he tells Reuters.
Australia’s industry is dominated by Foster’s, the world’s second largest wine company, with brands including Beringer, Rosemount and Penfolds. Other major players include US-based Constellation Brands, which owns the Hardy’s label.
French-based Pernod Ricard owns the top-selling Jacob’s Creek, while some other major Australian exporters are family-owned, such as Casella Wines.
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Australian Winemakers Facing Export Slump
Global demand hurt by financial crisis; shipments down 18% by value in 2008
Reuters
22 January 2009
From a picturesque hill overlooking the hazy distant foothills of Australia’s eastern ranges, Bruce March can see a crisis facing the country’s A$2.4 billion (S$2.39 billion) wine export industry with crushing clarity.
Mr. March, chief winemaker at Doonkuna Winery, in prized, cool climate vine country north of Canberra, had been looking forward to a bumper 2009 harvest, tripling production capacity last year in anticipation of rocketing China demand for his wine.
But the global financial crisis has exploded that interest, bringing with it a soul-searching for Australia’s vignerons, ironically when good rains and a late summer are set to yield one of the best harvests for years.
‘We set up to produce all this wine. We spent a lot of money, and then bang, the financial crisis hit us,’ Mr. March tells Reuters, standing near his largely new winemaking plant. ‘Our Chinese importer is hoping for a better next year. Right now, we’re tightening belts and we’re into survival mode.’
The latest export figures are depressing reading for Australia’s wine industry, which for decades led the so-called ‘New World’ challenge to wine’s traditional French, German and Italian strongholds.
Australia shipped 11 per cent less wine by volume and a whopping 18 per cent less by value in 2008, delivering the first setback for 15 years, according to government marketing agency Australian Wine and Brandy Corporation (AWBC). The average litre value of wine sold fell 7.6 per cent to A$3.53.
In key British markets, total value slumped 18 per cent, while in the US, exports fell over a cliff, slumping 26 per cent. Rare bright spots included China, which imported 32 per cent more Australian wine by value, off a low base, as well as Hong Kong (up 17 per cent) and Japan (up 4.1 per cent).
A few hills distant from Doonkuna, Tim Kirk now sees a reckoning facing the industry in the wake of what even optimistic marketers admit has been a very disappointing year.
‘We have had massive success with an approach of good wine, good price, cheap and cheerful, sunshine in a bottle. But in some respects, that’s been the seeds of our undoing,’ Mr. Kirk says.
His Clonakilla winery sits at the boutique end of Australia’s wine market and his reds, in particular an award-winning shiraz- viognier, have won international acclaim.
‘Rather than compete on good wine, great price, we need to focus on regionality, on great wine at maybe a good price,’ says Mr. Kirk, whose father began Clonakilla in 1971.
Australia exported 62 per cent of its wine in 2008 and in some markets, the percentage sold on promotion was above 80 per cent as the country looked to repeat 2007’s A$3 billion export high milestone. The average for France is around 40 per cent.
The industry is by some estimates 20 per cent too large with many newcomers having entered expecting an export bonanza.
That has harmed the image of Australia’s overall wine brand, says Paul Henry, AWBC general manager of market development, making it synonymous with low price in key markets such as Britain, and some parts of North America.
‘The real inconvenient truth for Australia is that we are not the best placed in the world to compete on volume or price alone,’ he says.
Greg Corra, who ships the top end of Australia’s wine to 32 countries from a small farm outside the capital Canberra, says that many large Australian winemakers have themselves to blame as they look for ways to cork an export crash.
‘Yes, there is a financial crisis. But the ones who are suffering the most are the larger producers who have allowed the quality of their products to decline in a bid to meet demand in the good times,’ he tells Reuters.
Australia’s industry is dominated by Foster’s, the world’s second largest wine company, with brands including Beringer, Rosemount and Penfolds. Other major players include US-based Constellation Brands, which owns the Hardy’s label.
French-based Pernod Ricard owns the top-selling Jacob’s Creek, while some other major Australian exporters are family-owned, such as Casella Wines.
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