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Australian woes continue

Published:  23 July, 2008

The tough times for the Australian wine industry look set to continue with a new report warning that producers face continuing losses' unless serious structural issues are addressed.

The annual Deloitte Wine Industry Benchmark Survey, estimates that around 40% of Australian wineries are making losses.

The financial problems of many wineries are so deep-rooted it now requires an industry wide approach to support much-needed structural changes,' said the report's author, Gary Doran.

Despite Australian exports continuing to rise - the latest figures from the Australian Wine & Brandy Corporation show an increase of 7% for the year to April 2006 - the average price per litre continues to fall, moving 5% lower to A$3.89. Since 2002 the average price of Australian wine exported has fallen 33%.

Exports account for more than 60% of the industry's output and the continuing high value of the Australian dollar is one the many reasons for the decimation of many producers' profit margins,' continued Doran.

Yet the challenges facing our wineries go beyond the high value of dollar or over-production issues. Given the maturity of the industry, real structural change is needed to reverse the price slump or much of this margin erosion will be permanent,' he said.

Despite export volumes increasing by 7%, exports by value were up just 0.8%. In four of Australia top five markets, exports by value actually fell with only Canada bucking the trend.

On a more positive note, sales to China rose 349% to 8.5 million litres, making it a top 10 market for the first time.