Australian wineries are reporting highly positive profits and forecasts  - most recently Southcorp's 45% leap in profits to A$312.7m (US$170m) and an ungraded forecast from Peter Lehmann Wines.

These have come primarily from continued surging export sales but the squeeze on the home retail market is tightening.

Aggressive expansion and a market share battle between the nation's two retailing giants, Coles Myer and Woolworths, has brought heavy discounting, ferocious competition for shelf space and fears among small and medium producers they may be forced out of business.

But the majors are also feeling the pinch. The Southcorp results brought headlines of a 45% overall profit increase. But chief executive Keith Lambert also reported that while profits from the US were up 25% and the UK by 17.3%, the domestic market profit saw only a 2.3% increase and there was a 4.1% decline in Australasian revenue.

He acknowledged that Southcorp was being aggressive in the home market with special offers such as 13 to the dozen. It was crucial for the company to get shelf and floor exposure. The war within a war has also seen the Coles Myer-Woolworths rivalry cut some prestige wine labels by 50% of the recommended retail price.

The Australian take-home liquor market is put at an annual $A9.5 billion ($US5.2 billion), of which Coles Myer controls 21% and Woolworths 13.7%.