The wine sector’s development has been characterised by long boom and contraction cycles, around an upward growth trend, according to University of Adelaide Professor Kym Anderson, from the School of Economics.
“The most recent boom began in 1986 with a steady increase in exports to take advantage of the historically low value of the Australian dollar," Professor Anderson says.
"But then the perfect storm of the mid-2000s, consisting of an appreciated Australian dollar, severe drought, high water costs and the global financial crisis, sparked the recent downturn."
Professor Anderson says that while the Australian dollar has since dropped considerably, this can’t be relied on alone to provide the growth necessary for wine sector profitability.
“Other countries such as Argentina, Chile and Spain are now producing respectable low-priced wine, and due to their lower production costs, the majority of Australian producers can no longer compete in that segment of the market,” he says.
KEY OPPORTUNITIES
“Individual firms are better differentiating their product – reaching out to fine-wine markets, shifting their production to cooler regions, changing their varieties – and that, plus the recent decrease in the value of the Australian dollar, is attracting domestic and international buyer interest in investing in our wine assets," says Professor Anderson.
“Historically, the sector’s more resilient firms have been able to ride out downturns and recover financially. But a return to long-run growth for the sector as a whole would be greatly helped by a boost to investments in innovation and in generic marketing that highlights our finer wine offerings.”
