Australia via the current Government has nailed her colours to the mast, allowing US marines to be based in WA. This is not a political publication but one has to wonder if long term this is a wise move or one of irrational fear. Only time will provide an answer.
The Australian wine industry is developing a China syndrome. Certainly there is optimism in the Orient and it needs encouragement, however let’s not drop the markets that have taken so long to develop. The UK and US may not be as glamorous as they once were, but so much of that glamour was fake and distorted the true potential. No matter how excited we get about China, the facts are it is still a small market, albeit growing. Export figures to the end of September show:
• UK 256 million litres, 69.9m bottled, 180.7m bulk [rest other package], average price per litre FOB bottled $3.48, bulk $0.98.
• USA 179 million litres, 126m bottled, 49.8m bulk [rest other package], average price per litre FOB bottled $3.38, bulk $0.99.
• Canada 53 million litres, 34.6m bottled, 16.33m bulk [rest other package], average price per litre FOB bottled $5.24, bulk $0.90.
• China 46 million litres, 28m bottled, 17m bulk [rest other package], average price per litre FOB bottled $5.98, bulk $1.34.
• Germany 42 million litres, 4.6m bottled, 37.5m bulk [rest other package], average price per litre FOB bottled $4.53, bulk $0.85.
In recent news out of the US, Australian wine selling in the price sector US$15 to US$19.99 per bottle is up 23 per cent in the food, drug and convenience store channel. The over-US$20 sector is reported to be up 4.6 per cent. What Australia mustn’t do is turn her back on established markets. Looking at the figures from another angle:
• UK bottled exports over $7.50 a litre: 2,550,922 litres
• USA bottled exports over $7.50 a litre: 3,932,163 litres
• Canada bottled exports over $7.50 a litre: 4,693,428 litres
• China bottled exports over $7.50 a litre: 4,850,066 litres
• Germany bottled exports over $7.50 a litre: 705,107 litres
What this demonstrates is there is still good money being earnt at the top end in Canada and the US; almost the same as in China. And 283,435 cases of highly profitable wine sales in the UK is no bad deal either. Producers such as Dowie Doole are enthusiastic about the German market, though it can be seen it’s very small for top-end Australian wines.
Whilst various anti–alcohol bodies threaten the collapse of civilization as we know it. It's good to get news showing all is not as bad as they say.
The Scottish Health Survey 2010 has found a reduction in alcohol consumption. The figures show that the per-week per-adult consumption has reduced from 14.1 units in 2003 to 11.6 units in 2010.
Even better news is the survey covers 7,245 adults therefore a large base making the results more representative of the population. Other results included:
The proportions drinking in excess of recommended weekly alcohol limits declined between 2003 and 2010, from 33 per cent to 27 per cent of men and from 23 per cent to 18 per cent of women.
There was no significant change in the proportion of men drinking above the recommended regular daily limit between 2003 and 2010 (43 per cent - 45 per cent) but the proportion of women exceeding their recommended limits declined steadily (from 37 per cent in 2003 to 33 per cent in 2010)
If the anti alcohol lobbyists want to claim success for the reduction via greater awareness and better education that is fine, continue to do so. The alcohol producers will actively get involved. The question is do stricter measures need to be taken, are not the anti alcohol guilty of scaremongering?
Figures released by the Hong Kong Trade Development Council show a huge amount of wine is going through the region: US$856 million ($826 million) in the January to August period; it’s looking like the billion-dollar barrier will soon be broken. However, counteracting that is news that the London International Vintners Exchange’s Liv-ex Fine Wine 100 Index (which tracks the price of the 100 most sought-after wines) has fallen for the third straight month. Adding another twist is the establishment of the Dinghong Fund, which is planning to invest €110 million ($146 million) on wine over a five-year period. Naturally the investors being sought are Chinese and the money will be spent on Bordeaux and Burgundy. The minimum investment is €1 million for a company and €100,000 for an individual.
The best or not the best news
Stevens Garnier, the UK agent for Best’s wines, is to be taken over by Sogrape Vinhos, Portugal’s largest producer. As well as the globally successful Mateus Rose, the company also owns Sandeman port and sherries along with Offley and Robertson’s port houses and a host of Portuguese and Spanish brands. The empire stretches as far as Argentina and Chile and includes Framingham wines in New Zealand. It will be interesting to see how this benefits (or not) Best’s.
Lost money, possible refund
There may be some good news for Australian suppliers to crashed UK retailer Oddbins. The administrator, Deloitte, has announced there may be some money to dish out: a payout to unsecured creditors of up to 6 pence in the pound.
However, the announcement is one thing, the payout another. It is unlikely to come this side of Christmas and Deloitte has until next April, when the final decision has to be made. As the administrator has already claimed more than £2 million ($3.2 million) from the collapse and its fees come first, no doubt a few more shekels will find their way into their purse.
We are the champions
The team at McGuigan Wines are in party mode having picked up International Winemaker of the Year and Australian Producer of the Year at the International Wine and Spirits Competition in London on Wednesday 16 November. It’s to be congratulated as it’s the second time in three years. Where does the pole dancing club enter the story? Ah that is something between TKR and Neil McGuigan.
No we are the Champions
Also in party mode is David Ritchie CEO of Delatite who writes, “Apropos alternative/new varieties vs. old ones (plus a bit of bragging!) our 2006 Riesling won trophies for best Riesling, best white wine, and champion wine of show at Hobart 16 November.
No Albarino in sight. This is the first of our wines that we've kept a portion back so that we could release it when it's hit its straps so I am very pleased. Even more delighted as a Victorian that a non SA Riesling won.”
Some facts and gripes
The Australian food and grocery sector, including wine, is worth about $108 billion. It employs 312,000 people, half in rural areas. The overall gripes will be familiar to many in the wine industry:
• Rising costs of wages, water and energy.
• The high Australian dollar making imported products cheaper.
• Near record high global commodity prices – sugar, dairy, cocoa, oilseeds and wheat.
• Intense supermarket discounting in a range of products forcing down retail prices and seriously impacting manufacturer margins – supermarkets expect manufacturers to accept no or very small price increases to support their reduced prices.
• The rise in market share of private label products in the world’s second most concentrated retailer market.
• Increasing government regulation – e.g. the proposed Blewett Labelling Review recommendations could force industry into expensive and multiple labelling changes.
The simplest statistic, but perhaps the most telling, shows that the industry has grown at a much slower rate (2.1 per cent per annum) than the demand for food and grocery items (3.8 per cent per annum) in Australia.
Imports fill the gap and the report points out that since 2008 Australia has become a net importer of manufactured food and grocery products. Looking forward, the report raises several points, again many familiar to the wine industry:
• The retail market is expected to remain highly concentrated (Coles and Woolworths).
• Private label is forecast to grow strongly and could potentially account for 40-50 per cent of total supermarket sales by 2020.
• The Australian dollar is expected to remain high.
• The relative cost position of Australian manufacturers is forecast to remain significantly higher than lowest cost regional competitors, with on average a 22 per cent cost differential.
• Imports are forecast to continue to rise, from $25 billion per annum to $47 billion by 2020.
• Energy prices are expected to increase sharply in the next few years. In real terms, energy prices are forecast to increase by 8 per cent between 2011 and 2012 and then 42 per cent between 2012 and 2013, in part due to the introduction of a carbon tax. From 2014, prices are forecast to increase more modestly at 1 per cent per annum (in real terms) through to 2020.
• Labour scarcity pressures are expected to continue.
• Nominal labour costs are forecast to grow by 3.6 per cent per annum.
Par for the course, the sector is looking to policy reforms for salvage. Par for the course in a global economy, it’s unlikely the sector will get more then the odd token, no matter what government is in power.
More facts and some predictions
It’s hardly surprising the Asia-Pacific region is predicted to be the fastest-growing region for the alcoholic beverage markets over the next five years. Global spirit consumption is predicted to rise from 2.81 billion cases to 3.32 billion between 2010 and 2016. Of this growth, 85.9 per cent will come from two markets: China (63.2 per cent) and India (22.7 per cent).
Wine growth in Asia is expected to account for 75 per cent of the forecast. China, leading the way, is expected to add 240 million cases between 2010 and 2016. Total wine is predicted to rise from 3.39 billion to 3.68 billion cases by 2016. Strong growth is also anticipated in the US (+45.8 million cases) and Russia (+21.4 million cases).
The Australian Bureau of Statistics has released its Australian Grape Crush and Wine Production, 2010-11. It’s a preliminary report; the final is due February 2012. Some facts from the report:
• 1.6 million tonnes of grapes were crushed in 2010-11, an increase of 19,000 tonnes (1.2 per cent) from last year.
• 325 winemaking businesses crushed more than 50 tonnes of grapes.
• 149 winemakers crushed from 50 to 400 tonnes of grapes, producing a combined crush of 25,000 tonnes.
• 176 winemaking businesses that each crushed more than 400 tonnes of grapes crushed a total of 1.6 million tonnes, 98.4 per cent of the national total of grapes.
There are around 2,500 wineries in Australia: interesting that under 200 of them account for over 98 per cent of production.
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