COMMENT: Australia faces rugged year
New official figures confirm that Australian wine exporters face their most rugged year in a decade. They are between the rock of a strong local currency and the hard place of a wine grape harvest now officially estimated to be 28% above that of 2003.
Although the industry is apparently buoyant with exports worth A$2.4 billion (US$1.85 billion) for 525m litres, in calendar 2003, there are already signs of softening demand.
The Australian dollar has dramatically strengthened against the US dollar, pound sterling and euro. Latest retail figures from the US, which in 2003 became the biggest market by value, already show a softening in demand.
Brand leader Yellowtail continues to expand and established brands such as the Pernod Ricard-owned Jacob's Creek are holding market share but overall competitors, especially from Latin America, are nibbling at Australia's market share.
As this concern was being digested the official Australian Bureau of Agricultural and Resource Economics, ABARE, projected that the 2004 vintage would be 28% above drought affected 2003.
Domestically, this is already impacting on the industry with widespread expectation of lower grape prices and, more importantly, concerns about storage space for newly fermented wine. While some niche export areas will be impervious to such fluctuations the immediate prospect is for a further decline in average dollar per litre returns which, overall, fell 4.8% in calendar 2003, the first time this had happened since 2001 when the drop was 2%.
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