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4/05/2015

Aussie wine and beer in good spirits, says Owens-Illinois

Australia’s embattled wine sector, crushed in recent years by a strong Australian dollar and a glut of cheap commercial wine, could be in the early stages of a return to growth, says one of the world’s biggest suppliers of wine bottles, the US-based Owens-Illinois.

Reporting the company’s first quarter earnings, Owens-Illinois chairman and chief executive Albert Stroucken, who recently visited the group’s glass bottling factories in the region, said there was also early evidence of a stabilisation of plummeting beer volumes as shoppers returned to the stores.

“In Australia, it appears that the wine and beer markets are stabilising albeit at a lower year-on-year level,” Mr Stroucken told investors in the US.

But it was the crashing Australian dollar that was fuelling the most promising reward for winemakers as local wines long outpriced by competitors in South America and Europe were starting to become more competitive.

“In particular, we may be seeing early signs of an uptick in wine exports as a result of the lower value of the Australian dollar,” Mr Stroucken said.

“We were recently in Australia, and I think the latest reports that we’re getting from the wine industry were certainly a little bit more confident about volumes because the decline in the Aussie dollar allows them again to reach the pricing points on the shelves economically.

“So I’d expect that trend-wise we’re going to see some strengthening.”

Recent sales data from the Australian Grape and Wine Authority has shown anecdotal evidence of a renewed interest in Australian wines globally was showing up in export figures.

Australia posted a rise of 3.6 per cent in volume and 3.9 per cent in value of wine exports for the 12 months to end of March 2015, according to the latest Wine Export Approval Report, with offshore sales driven by the depreciating Australian dollar as well as the commencement of the Japanese FTA and a rebound in the Chinese market from recent austerity policies. For the 12 months to March total Australian wine export volume rose by 3.6 per cent to 711 million litres while total value rose by 3.9 per cent to $1.85 billion. The average value of exports was steady at $2.60 a litre.

The chairman of 166-year old South Australian winery Yalumba, Robert Hill-Smith, said the falling Australian dollar was generating greater interest in local wine by overseas buyers but that it wasn’t a cure-all.

“As I’ve always said, the problem is not so much of the dollar as the fashion cycle that we are in, but certainly there is no doubt that the foreign exchange movement has caused people to reassess the commerciality of their Australian wine category or their relationship with the Australian category I think,” Mr Hill-Smith told The Australian.

Yalumba exports about 30 per cent of its wine, and the group hadn’t detected as yet any major boost in demand driven by the falling dollar. “I am confident to be honest the amount of visits, inquiries and discussion that something positive is going to shift out of the lower dollar, but it is a bit too early to be calling it.”

-Orginially reported in The Australian by Eli Greenblat.


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