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Wine market growth possibilities still exist despite challenging supply position

Australian wine is at a crossroads not a cliff-face, according to a leading UK wine journalist. Penny Boothman, deputy editor, The Drinks Business, told nearly 400 winemakers and marketers at this week's 2005 Wine Industry Outlook Conference in Adelaide that opportunities still existed for the Australian wine industry – particularly in the higher priced premium market and in niche varietals such as Rosé – despite more intense competition and an over supply of some grape varieties. “Australia still outperforms the market in the UK,” Boothman said. “It is the market leader in off-trade sales, yet still grew by 8% last year, while the market grew only by 6%,” she said. “There is a view in Australia that the wheels have somehow fallen off your industry. Let me tell you, in the UK we see the opposite. The Australian industry has an enviable reputation and is leading from a position of strength in difficult times.” Managing director of Australia’s largest wine company Foster’s Wine Estates, Jamie Odell, agreed that many positives still existed in the world wine market. “We have to stop talking about problems and start talking about solutions,” he said. “Over supply is a worldwide phenomenon and Australia has to aim higher and encourage consumers to discover its regional premium wine offerings and diversity. “Our competitors are catching up on quality at the everyday price level and we have got to graduate consumers around the world to higher priced Australian wines,” he said. Odell picked up on a key theme at the conference, which was “working together”. “As the largest wine company in Australia we are aware that our success will benefit Wine Australia’s image and penetration overseas. “Come along with us and let’s be positive about the future.” The United States market still offered opportunities, according to Odell. The strongest opportunity was in the $15 and above category where Australian wines currently hold less than 0.5% of the category. Another positive call to action was presented by industry campaigner Brian Croser, formerly the head of Petaluma and now a wine consultant. Croser said there was a place for both commodity Australian wine and fine Australian wine in world markets but up to this point Australia’s super premium offering was not well understood overseas. “Fine wine producers need to establish credibility and a meaningful market share,” Croser said. “We need to focus on what I call The Idea of Quality, by convincing consumers that we do produce differentiated wines, that we have a range of terroirs and that there is a great Australian story which supports the unique tastes of our wine.” Croser said it was time to invest in fine wine quality and he called for the industry to contribute more to research, education and promotion of fine wines. “We need a research agenda which focuses on quality.” Although Australia had laid a strong foundation during the past 15 years as an international exporter of quality wine, the conference was also told that Australia’s over supply was acute and some businesses could labour under its hangover until the end of the decade. “The rapid increase in the size of the industry during the late 1990s – whether new wineries or vineyards – was not based on realistic expectations of market growth and opportunities,” Stephen Strachan, chief executive of the Winemakers’ Federation of Australia said. “So while we are continuing to forge ahead in our main markets, not everybody is sharing in that new growth opportunity. “This is a concern for grapegrowers who find themselves at the end of the supply chain. Those who are on long-term contracts, linked to a successful brand owner have a much brighter outlook than their counterparts who will unfortunately have to ride out this agricultural cycle of over-production. “However, grapegrowers are not alone. Those wineries without strong brands are also going to find the going tough for a few more years yet.”

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