Two of Australia’s largest makers have warned that 2010 is likely to be a difficult year for Australian wine. According to Ian Johnston, chief executive officer of Foster’s, the wine category is ‘bearing the full brunt of a lack of consumer confidence brought on by global economic conditions’. He maintains that ‘recessionary economic conditions’ will keep business ‘challenging’ in key markets and that ‘wine returns are not where we want them to be.’ Dane Hudson, group chief executive officer of Australian Vintage, Australia’s second largest vineyard owner, says ‘the Australian wine industry is facing a new stark reality, (for) the old golden age has well and truly gone’. He argues that the present Australian wine industry is a third bigger than it needs to be, saying: ‘It is clear the industry’s present operating model is unsustainable as there are still too many grapes being grown and too much winery capacity. Lower demand, lower prices, the global financial crisis and a high dollar are exacerbating the issues.’ While Foster’s net profits have increased by 4% on the back of strong beer sales, its global volume of wine sales has declined by more than 5%. While the company attributes some of this decline to the fact that it no longer plays in the wine cask market, it does report growth in the lower-priced bottled wine category. Sales of high-end wines, especially in the on-premise sector, have declined markedly. Its wine sales might have increased by 9% to $288 million, but the troubled Australian Vintage has reported a net loss for this full year of $123.6 million, against profits of $1.3 million the previous year. The company attributes these losses to the devaluation of assets and grape supplier contracts it describes as ‘onerous’. Although its total export sales declined by 10% on the previous year, its branded sales increased in all markets except New Zealand by 8%. With sales to major Australian retailers increasing by 24%, the company’s domestic sales of packaged wine have increased by 6%.
