NAB Says The Australian Wine Market Is Improving After A Decade-Long Glut

NAB’s outlook for the Australian wine industry is improving, with the falling AUD likely to improve exports and winemakers likely to produce more, higher quality wines this year.

NAB agribusiness economist Vyanne Lai today reported that the falling dollar had “lifted industry confidence and is likely to provide some relief to export competitiveness”.

Lai said demand from “new world” markets including China, the US, Russia and the UK, to be key drivers of growth in global wine consumption, with wine consumption set to grow by 12% in the US and 50% in China from now until 2016 to become the first and second largest global wine consumers respectively.

Tough international trading conditions saw Australian winemakers exporting 3% more wine by volume for 2% less in value last year, compared to 2011. Exports account for 63% of wine sales.

Domestically, Australian wine sales fell 2% last year, with overseas wines – in particular, New Zealand Sauvignon Blancs – becoming more popular. Sales of imported white wines were up 20.1% in 2012.

Lai also noted that wine producers’ profits were suffering from the fact that Wesfarmers and Woolworths controlled more than 60% of the liquor retailing market and were pushing their own label wines.

“Domestically, wine sales in Australia are likely to be further challenged by an increase in market share of imports,” NAB reported.

“Nonetheless, some hope has arisen from a notably depreciated AUD, which is expected to fall further, that it will offer some relief to Australian export competitiveness.

“Furthermore, the Australia 2013 vintage is reported to be shaping up to be an above average year. The drier conditions during the last summer and autumn have helped to reduce disease risk and improve grape quality, although some varieties did not survive the dryness which culminated in an overall lower annual wine grape production.

“A weaker production in the year, aided further by improved exports prospects from a lower AUD, has lifted expectations of a further amelioration in the wine glut and a boost to prices and profit margins.”

Now read: This Chart Shows The Power Ben Bernanke’s Words Hold Over The Australian Dollar

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