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5. Australian Wine's Competitive Edge
An essential starting point for any industry undergoing organisational change is an understanding of its strengths and weaknesses relative to its key competitors.
Australian wine author and commentator, James Halliday has undertaken an assessment of the Australian wine industry's competitiveness in three main areas: physical supply factors, human factors and market factors, which ranks Australia's competitive position in 1996 alongside 10 other key wine producing and trading nations.
Australia leads the world in physical supply factors. It has developed excellent varietal choice through vineyard development and it produces consistent quality at all given price points. This makes it a strong competitor to countries such as New Zealand which has climatic restrictions and Traditional Europe (France/ Germany/Spain) which is restricted by appellation control. Australia's lower land costs, a large choice of climate, terroir and moderate water availability means that the nation's natural resources and environment will not restrict expansion.
Australia's closest competitor in terms of physical supply factors will be Chile, as a result of its low cost production, good supplies of quality land and water and its commitment to premium varieties such as Chardonnay and Cabernet Sauvignon.
Australia ranks fourth behind Traditional Europe, Chile and California in terms of its human competitiveness.
Australia compares favourably with Traditional Europe, California and New Zealand in terms of its skilled viticulturists and winemakers (who are equal to the best in the world), and its modern industry infrastructure and research institution network. It is also free of the regulatory rigidity which stifles European viticulture.
Its greatest threat to competitiveness is a lack of government support. Halliday points out that the Federal bureaucracy is strongly antipathetic to the industry and Federal politicians are neutral. This is backed up by a punitive tax system and little facilitative support. State Governments are seen as more supportive.
Australia ranks second to Traditional Europe in terms of market competitiveness, well ahead of other competitors such as Italy, California and Chile. Traditional Europe's dominance of the top end of the market in terms of image, reputation and branding makes it the world market leader.
However, Australia's proactive relationship with and attitude to the market place, its product depth and diversity and its commitment to distribution networks and effective, hands-on promotion have delivered success. The assessment says Australia offers exemplary value for money and is well endowed with world scale corporates.
In summary, Australia's wine industry is strongly competitive because its strengths are across the board Ð strong resource endowment, institutional support and marketing innovation. These advantages will come under increasing competition but Australia is well placed to seize further market share as the leader of New World producers.
ENSURING ENHANCED COMPETITIVENESS BY 2001
The competitive advantage underpinning the 2025 Vision will be created by:
- an innovative industry culture which enables a responsive adaptation and evolution of resources, technology, skills and institutions to meet consumer needs.
- demonstrating product leadership in intensity, complexity and diversity of flavour.
- providing value at every price point.
- developing image and brand strength.
Australia has the potential to make more rapid progress than its key competitor, Traditional Europe, due to possible advances in quality, cost competitiveness, branding, an improved investment climate and government support. These advances will come about from the implementation of the industry's 2025 Strategy.
If Australia does not improve its position (due to failures in implementation of the strategy) Chile is likely to become an equal competitor by 2001 due to substantial gains in variety choice, quality, skills and industry infrastructure. Italy is also likely to make rapid advances, and though South Africa will benefit from an improvement in varietals, quality and marketing, it is not expected to close the gap.
Overall, Australia can strengthen its competitiveness so that it has a clear lead over Chile and Traditional Europe despite significant gains by Chile, South Africa and Italy.