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No short-term solution to Australian oversupply

Published:  23 July, 2008

The current oversupply of wine in Australia is set to continue until 2010 at the earliest, according to the latest figures.

Lawrie Standford, information and analysis manager at the Australian Wine and Brandy Corporation (AWBC), said that despite a 2006 harvest that was 4% down on the previous year, the surplus of Australian wine still amounted to 900 million litres. Stanford was speaking at an industry seminar on the eve of Wine Australia 2006, at the Sydney Convention & Exhibition Centre last Thursday (14 July).

He said that the reduction in the 2006 harvest was partly due to some grapes being left on the vine', and that if that was ignored, the harvest was only 1.5% down on 2005. On the subject of yields, he said that the trend over the past three years had been upwards, whereas yields had been falling between 1999 and 2003.

He added: Stockholdings have been above the ideal position and have been growing since 2001, but the forecasts suggest that they will be back in balance by 2010.'

On a more optimistic note, he pointed out that to bring stocks back into balance, sales would have to hit the 1,100 million litre mark, a figure which is in line with current growth patterns. In the past year, sales increased by 7.2%, while production rose by 1.3%, and with yields per hectare downby 2.7% over the same period, production is effectively down by 1.4% - more evidence that the oversupply will be brought under control.

Stanford said that there was a shortfall of warm inland fruit', in that grapes from these areas account for 85% of the market opportunity' (and 15% for cool-climate areas), but the production ratio of warm:cool fruit is 60:40. He also claimed that in the UK off-trade, Australia was actually underperforming at lower price points, and overperforming at the higher end.

The opportunity in the UK would appear to be at lower price points, something that we've never really wanted to do,' he said.

When asked if this statistic was at odds with Wine Australia's desire to see UK consumers trading up, Paul Henry, AWBC general manager, market development, told Harpers: There's an opportunity with the cheaper price points that will be the function of unbranded and bulk-shipped wines, but I think it's more of an opportunity of price than one of a marketing message.'

Stanford concluded: Recovery does not appear to be just around the corner, but we shouldn't lose track of the fact that the underlying and fundamental value of Australian wine is still there.'