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July (No. 498)


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Wine industry strategic management or another 'bust'?

David Valentine

In recent times the Australian wine industry has been experiencing difficulties such as: adverse changes in the $A exchange rates, significant share price falls, an ongoing industry shake-out, and substantial restructures. All of which has been compounded by alterations in the domestic retail market placing further pressure on wine price points and winery margins.

This is quite a change for an industry that was held in such high esteem for much of the previous decade due to its consistent annual growth in exports of 20% or more. This growth, previously acclaimed and respected, eventually became a wine oversupply in 2002.

Despite continuing to increase exports, at about 15% pa or better since 2002, a rising $A exchange rate exacerbated the oversupply and forced increasing price point competition that continues today. Recent information from the Australian Wine and Brandy Corporation (AWBC), the industry’s governing body, advised in February 2005, that the current supply and demand pressures would continue.

Historically, the wine industry has experienced repeated boom-and-bust cycles. The ‘busts’ have been caused, to a significant extent, by the failure to supply the demand for quality product as a result of inadequate strategic growth and inventory management. In the new information age, is wine industry management sufficiently strategically aware and equipped with reliable data to avoid a recurrence of the past?

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