A struggling export market has constrained the industry.
Melbourne, Australia (PRWEB) November 16, 2013
The Australian Wine Production industry has faced difficult trading conditions over the past five years. IBISWorld industry analyst Ryan Lin states “exports have been hurt by volatile economies in key export markets, a soaring Australian dollar (which has made industry exports uncompetitive) and rising competition from new low-cost wine producers.” Manufacturers are losing bargaining power against supermarket giants and consumer preferences are changing. In addition to these factors, a vast oversupply of wine and wine grapes has forced down prices, squeezing margins and forcing many producers out of business. However, the emergence of ciders has helped to slightly offset the falling international demand for Australian wines, with domestic demand fuelled by Australians' love of a cold beverage on a hot summer day.
According to Lin, “having belatedly come to terms with the chronic oversupply of wine in the market, producers have addressed the problem by writing off assets, closing down wineries and destroying vines.” The industry faces a long and painful process before the market returns to balance. However, conditions are expected to be less challenging in 2013-14, as the declining Australian dollar helps to offset volatile economic conditions in key export markets. Continual discounting and oversupply of wine will still weigh on domestic revenue. IBISWorld expects industry revenue to decrease at an annualised 1.9% over the five years through 2013-14 to reach $5.7 billion. However, industry revenue is expected to rebound slightly during 2013-14, posting slight growth of 0.7% on the previous year due to recovering economic sentiments and rising consumer confidence. Continuing growth is forecast for 2014-15, as the sluggish global economy recovers momentum. Weak price growth is expected to constrain domestic revenue performance and profitability as industry players look to capitalise on domestic consumption. In the two to three years leading up to the end of 2018-19, industry operators are expected to shift production towards premium wines, while Asian export markets will play an increasingly important role in the industry's future. Winemakers are likely to work on producing single-vineyard wines, while focusing more on cellar-door and online sales.
Market share concentration for the Wine Production industry is at a moderate level. Over the past five years, concentration in the industry has changed as major producers have purchased and then divested certain production facilities. Industry concentration is expected to have peaked following the acquisition of Southcorp by Foster's Group (now Treasury Wine Estates) during the early 2000s. Over the past five years, market share concentration has increased, especially as the oversupply of Australian wines causes the closure of smaller industry players. The industry’s major players are Treasury Wine Estates, Premium Wine Brands, Accolade Wines Holdings and Casella Wines. For more information, visit IBISWorld’s Wine Production report in Australia industry page.
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IBISWorld industry Report Key Topics
The Australian Wine Production industry purchases grapes and other key ingredients, which are processed into wine, port and wine-based alcoholic beverages. These products are packaged in bottles or casks then sold to wine merchants and retail outlets. This industry also includes other alcoholic beverages not categorised elsewhere.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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