Australia’s wine industry faces supply risks amid growing demand for premium wine

Demand for premium wine is driving a strong outlook for the Australian wine industry but smaller producers may need to compete harder for limited supply, a new ANZ report shows.

ANZ’s latest agriculture report, Ripe for the Picking, also reveals growing competition for premium grapes is likely to lead to more plantings in emerging regions.

Commenting on the report, ANZ Director of Agribusiness Client Insights Michael Whitehead said: “Rising export demand and potentially detrimental weather conditions will exacerbate limited supply, which could drive greater competition for smaller producers.

“Much of the new plantings will come as a result of grafting existing acreage to modern varieties, and planting in the cooler climate regions of Tasmania and Victoria,” Mr Whitehead said.

Based on recent supply contracts issued by large processors, many growers believe there’s a shortage of key varieties in select locations, such as Shiraz in the Barossa, which will also shape future strategies.

The report also shows technology will play a major role in improving efficiencies in productivity and through the broader supply chain.

“Some of the most innovative advances for future wine production will come through developments in testing and using data from wine during the maturation process,” said Mr Whitehead.

Despite supply concerns, confidence in the sector is growing backed by the industry’s strong global reputation, international demand and the Australian dollar’s current low value.

These factors are driving a recent increase in larger industry mergers and acquisitions following a period of smaller transactions from 2010 to 2017, and consolidation among smaller labels.

“We expect consolidation to continue over the short-to-medium term and although the majority of recent M&A transactions have involved domestic investors, the industry’s long term growth potential, exposure to export markets and favourable currency provide major incentives for foreign investors,” Mr Whitehead said.

Winetitles Media will be providing summaries of the key trends from the ANZ agri-report in upcoming issues.

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