Australia's wine industry hit by series of problems
July 2, 2009
By Chris Snow in Adelaide
Australia's wine industry is reeling from a series of unwelcome developments.
These include a bigger than expected vintage, a surplus of 476m litres of wine, a large winery going into receivership - and Foster's slashing staff at its 80,000 tonne winery near Mildura.
Foster's announced on Tuesday that 50 of the 300 staff at the winery, Australia's fifth largest, will be gone by September because of still falling wine demand, particularly during the past six months.
The winery produces most of Foster's large-volume brands, mainly Lindeman's, and most of its sparkling wines.
Some of the job losses are additional to the global 300-job reduction announced by Foster's in February.
It also announced Australian and US asset sales of AUS$243m.
'Like other Australian wine producers, Foster's has been affected by the downturn in global demand and over-supply in the Australian wine market,' said Stuart McNab, Foster's director of wine production for Australia and New Zealand.
The over-supply was last week estimated at 476m litres – equal to 40% of annual domestic and export sales.
John Grant, Constellation Wines Australia president, predicted a 30% cut in grape prices in 2010 in Murray Darling, Riverland and Riverina which produce about 60% of the national crop.
Grant said Constellation, which is in the process of shedding 300 jobs in Australia, would be reducing its Australian production from about 300,000 tonnes to 200,000 tonnes a year.
It would quit the declining sub-$7 a bottle domestic market, exit the 'profitless' 1-litre bottle market and withdrew from unprofitable export segments, particularly in the UK where margins were being squeezed.
Grant's comments came a few days after the Winemaker's Federation of Australia put the 2009 crop at 1.71m tonnes, about 17% more than needed.
'It's larger than the greatest estimates and unfortunately it's a situation where going forward the industry doesn't need anything over 1.5 million tonnes – and that's being generous,' the managing director of Orlando Wines, Stephen Couche, said.
The cuts at Foster's winery near Mildura follow the placing into receivership of the nearby 40,000-tonne Neqtar winery, a subsidiary of Neqtar UK which also owns UK wine distributor HwCg.
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So the wine industry is just Fosters and Constellation? It would be nice if the views of one, or some, of the 2500 other wine producers in Australia were canvassed or taken into account for once in a while. Things might be all doom and gloom for a few in the wine industry but many are quite positive about the future! It took the oversupply of the 80's to see the emergence of new players eg Peter Lehmann, whilst some major players fell off their perch. The current situation may well see something similar happen. There's always opportunities out there it's just a question of taking advantage of them.
James Tilbrook, Australia
As a small wine producer in Mendocino County California I am not surprised this over supply of wine and grapes is happening in Australia because it is happening all over the world, even here. The downtown in the world economy just created a situation that was bound to happen sooner or later. Frankly there are just too many wineries and vineyards in the world producing more wine than the world can drink right now. I do partly blame the large corporate wine companies worldwide for producing a ocean of ordinary wine from the same old varieties with critter labels and crazy names. Although Australia produces many great wines, I believe that it is as guilty as anyone in this regard.
Gregory Graziano, California
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