Profitability performance and profit drivers for the Australian wine industry; the relative importance of each driver for different types of wine business; and the implications for industry reform

Abstract

The objective of the Expert Review is to provide a fact base and perspectives to help WFA determine where it should focus its resources and how it can support individual participants in their decision-making. The Review assessed a broad cross-section industry analysis and conducted confidential interviews and workshops with wine businesses, and considered profitability, demand/supply, the impact of market “distortions” such as taxation, exchange rates and retail consolidation, which previously have been considered in isolation.

Summary

The Australian wine industry enjoyed considerable success from 1991 to 2007. It more than tripled in size from less than 400 million litres to 1.2 billion litres and achieved total revenues of $5 billion in 2007. The value of exports grew from $212 million to $3,004 million. The industry and many of its participants built an enviable global reputation for producing quality wine and created strong export markets particularly in the UK, US and Canada. Despite the recent difficulties facing the industry there are number of positives. There has been a significant increase in domestic consumption of quality wines. From 2007 to 2012 the domestic consumption of Australian wine sold above $15/ bottle increased by $268 million (64%) in value terms and 11.6 million litres (42%) by volume. Unfortunately for the overall industry this only accounts for 16% of all wine produced in Australia by value and 3% by volume.