The worst of the Australian wine industry's problems could be behind it, according to speakers at the 2004 Wine Industry Outlook Conference.

David Cooke, director and food and beverages analyst with ABN AMRO Equities Australia said the worst was behind the Australian wine industry in terms of supply and demand, and forecast 3% compounding growth in New World wine demand between 2003 and 2007.

He said New World wine production would reach a level of equilibrium by vintage 2006 which would present Australian producers with an opportunity to reassert themselves in the vital UK market and attempt to grow market share at higher price points.

However, chief executive of the WFA Stephen Strachan cautioned the industry against interpreting this optimistic outlook too broadly.

"We may be moving through the oversupply, but our industry needs to ensure that any future growth is profitable growth," he said.

"Particularly for small wineries, oversupply challenges will remain for a few more years at least. The winners will be those with strong brands and access to good distribution."

This was echoed by Australian Wine and Brandy Corporation manager of information and analysis Lawrie Stanford, who presented the latest grape and wine supply and demand information.

Lawrie endorsed the view that the current surplus of winegrapes would potentially return to balance within two years, providing there were no new plantings and export and domestic sales growth continued at its current rate.

Meanwhile, another speaker suggested Asia could act as the next frontier for Australia's winemakers, but they would need to work hard to achieve results in the major regions such as China, Japan and India.

Speaking at the Conference, which finished yesterday, Mark Bedingham, Asia, Japan and Australasia region managing director of Moet Hennesy Asia Pacific, said while Australian wineries have been successful in South East Asia, they have missed opportunities in the rest of Asia, especially Japan.

Bedingham said Australian wine accounted for just 4% of wines imported into Japan in 2003, and was being overshadowed by French, Italian and other Old World wines.

"It's hard to ignore Japan. I think it's a 3m case opportunity at good prices," he said.