Days of cheap wine are over
It’s a sad sight to behold. Walk into any Australian alcohol sales outlet and you will notice immediately the promotion offers clinging on to wine bottle necks. It cannot have been fun being an Australian wine producer these past years as the industry suffered from overproduction and a rising Australian currency which seriously hampered export sales. On 15 February 2011 Foster’s reported that during the first half of its current financial year (ended 31 December 2011) wine profit from sales in Australia and New Zealand rose 7 percent to AUD 39.6 million. Profit from wine in North America and South America gained 24 percent to AUD 54.2 million while in Europe, the Middle East and Africa wine turned to a loss of AUD 500,000 from a profit of AUD 12 million a year earlier.
Foster’s announced it will cut AUD 100 million of annual costs from its wine unit Treasury Wine Estates by the end of June.
In its push to become the world’s number two wine company, Foster’s spent over AUD 6 billion on its wine acquisitions. But after a decade-long expansion Foster’s had to write down more than AUD 2.5 billion, which hurt profitability.
Other Australian wine producers, which make the bulk of their business domestically, have not fared any better. “The industry is going broke,” Australian Wine Grape Growers Association executive director Lawrie Stanford was reported as saying in February 2011 just as the wine industry was getting to this year’s harvest.
“Prices last year were presumably rock bottom and certainly unsustainable in the main.”
In 2010, some retailers were selling wine for as little as AUD 5 a bottle, while “cleanskins”, a generic labelled bottle that doesn’t reveal the winery or winemaker, could be found for as little as AUD 2.
Pressure on winemakers to produce wine at low prices for supermarkets meant growers were often being paid less than the cost of production.
Mr Stanford said about 13,000 ha of vines had been pulled up in Australia in 2010, while growers of an additional 8000 ha of vineyards had either not harvested or let their fruit rot on the vine.
According to the Australian Bureau of Statistics, the total grape crush for 2009-10 was 1.6 million tonnes, down 7.5 percent on the previous year.
This year’s spread of diseases, such as downy and powdery mildew, will reduce the 2011 crop further, easing the glut of the past few years.
