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Vintners Pressed by Aussie’s Rise

Blaxland Wine Group Australian wine industry vineyard with palm trees
Australia’s wine industry is turning sour as the strong local currency and a glut of grapes have driven export profits to a decade-low.

The value of Australian wine exports fell to 1.86 billion Australian dollars (US$1.91 billion) in the financial year that ended June 30, down from a peak of just under A$3 billion in the 2006-07 financial year and the lowest figure since 2001-02, according to government export agency Wine Australia.

The slump in the price of wine accounts for the drop in value; the volume exported in the just-ended financial year was greater than even that of 2007-08, when profits were more than 40% higher, the agency said.

“The rest of the world can’t get their head around the fact that this isn’t a cheap country anymore,” said Andrew Margan, president of the Hunter Valley Wine Association, and founder of boutique vineyard Margan Hunter Valley Wines.

Australian producers pitched their wine too cheaply and therefore were helpless when the stronger currency squeezed them out of the cheaper end of the market, he said.

Australia’s distinctive grape varieties, such as full-bodied shiraz and crisp sauvignon blanc, were among the nation’s fastest-growing exports over the past 20 years, but the surge in the Australian dollar has dramatically altered Australia’s place on the world stage. The currency has doubled in value against the U.S. dollar since 2001, while the average purchase price for a ton of Australian wine grapes, priced in Australian dollars, has more than halved, in part because foreign buyers resisted absorbing the exchange-rate shift.

Local vineyards have been squeezed out of traditional export markets in Europe and the U.S. as wine drinkers have turned to inexpensive South American wine. As a result, many producers have been forced to sell their wine as cheaper bulk exports to Asia, or have gone out of business. The amount of wine shipped in bulk was more than half of Australia’s wine exports last year from just 17% a decade ago.

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