Wine grape growth creates challenge

THE rapid expansion in the Australian wine grape industry has created a number of challenges according to a new report by the Australian Bureau of Agricultural and Resource Economics.

“There is little room for domestic market expansion so there will be continued emphasis on export markets,” the Australian Commodities Outlook 2000 report says.

“Innovation in marketing and promotion will still be required and consolidation of production, processing, distribution and retail activities will continue,” the report suggests.

With world supply rising faster than demand, wine grape prices will probably fall, requiring Australian wine to become more competitive on international markets.

Australian wine exports are projected to more than double by 2004-05 from a forecast of 346 million litres in 2000-01.

The majority of this increase will be in red wines which are forecast to rise 56 per cent by 2004-05.

The average unit value of exports will fall to $3.58 a litre by 2004-05 – a 21 per cent decline from the current level of about $4.50.

However, as production in Australia increases, new opportunities and challenges will arise in export market, the report says.

“When entering new markets and market segments, for example, exporters must win market share from other brands.

“The opportunities which arise and the challenges to be faced will differ between large and small wineries as they compete on the international markets.

“Internet sales and wine clubs are a rapidly expanding means of reaching and educating customers and increasing business,” it says.

“Finding and maintaining efficient distribution channels and complying with legal and regulatory frameworks of different countries will be ongoing challenges.

“The changing structure of distribution and retail systems, coupled with growing consumer demand for high quality wine, will influence future developments in the world wine market.

“The advent of large scale supermarkets, particularly in Europe, has made it easier for wineries selling large volumes to enter markets,” it says.

“Large retailers favour fewer suppliers to satisfy consumers who favour strong branding and consistent quality.”

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