Weather disaster predicted to help Australia out of glut

23 February, 2007

Forty per cent drop in annual grape harvest may fuel pressure on prices

Australian wines are expected to rise in price because extreme weather has caused a drop in production.

The Australian Wine & Brandy Corporation originally forecast a 20 per cent fall in the harvest for 2007 because of droughts and frosts, but it is now expected to be down by as much as 40 per cent. The apparent disaster will be welcomed as good news by many as it will help clear the glut of cheap and unsold wine that is distorting the market.

Leading Australian wine critic Jeremy Oliver believes prices will rise in Australia before April and there is a strong chance the same thing will happen in the UK.

He said: "Even at the reduced rate of export growth, Australia is trading out of its surplus. Drought and frost aside, most major winemakers anticipate they will have traded through most of their difficulties within 18 months and that grape prices w ill begin to rise again a year later. With the likelihood that the glut will cease to exist by April, wine prices could rise earlier."

Sainsbury's buyer Julian Dyer said: "At this point I don't know what impact there could be across every single SKU but there's no question there will be price pressure, particularly from the bottom end. Warm climate fruit, particularly for own-label, could be under pressure."

Dyer added that Australia faced strong competition from countries which still had a wine surplus, which may encourage price restraint. "It wouldn't surprise me if there was a bit of posturing going on," he said, adding that Australia's challenge now was to drive value ahead of volume.

Craig Smith of Australian Wine Agencies said smaller producers, such as Tim Adams, have decided not to up their prices. "Big companies have got their budgets to adhere to but a smaller player can afford to take a long-term view of the market," he said.

The AWBC said late-season frosts primarily hit cooler climate regions in South Australia, with the Coonawarra and Padthaway wine regions as well as the states of Victoria and Tasmania reporting the greatest losses.

Wine regions such as McLaren Vale and the Clare Valley in South Australia were also affected sporadically.

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