Australian giant Southcorp has suspended trading in its shares and downgraded its profit forecast, blaming tough competition, retailer margins, and oversupply – and shortage - of grapes.

The winemaker – Australia’s biggest, producer of Penfolds Grange, Rosemount and a host of other big names – has downgraded its forecast by 15%.

CEO Keith Lambert said it would no longer chase volume but concentrate on core premium brands – Rosemount, Penfolds, Lindemans and Wynns.

‘We acknowledge we’re tightening up and it would be a good idea if our competitors did the same,’ he said.

Shares dropped 5% as rumours circulated last week that there may be a downgrade. ‘We understand these rumours may have led to the higher than usual turnover in Southcorp securities on Friday, and may have contributed to the five per cent decline in the company’s share price,’ a press statement said.

Lambert said 2000 – a year in which poor harvest meant a dearth of super-premium wines – had finally caught up with them in one of the toughest trading periods in the global wine industry.

‘This was probably not a year we were looking forward to. It was always going to be a tough year.’

He also cited oversupply of wine in some markets, increased competition, the power and aggression of retailers in pricing wines, and the increased costs of promotion, which put more and more pressure on the bottom line, as reasons for the downgrade.

Written by Adam Lechmere, and agencies21 January 2003