Austwine urges Australia's bulk wine sector to remain cautious and look for long term growth

Australian producers should not get too carried away by what appears to be a healthy return to strong exports to key markets, particuarly China and the US, and keep working for long term growth.

That's the warning from Jim Moularadellis of Austwine, who says it is exciting to see that "Australian wine has become interesting again" and that "prices are generally rising" but the industry as a whole has to keep the momentum going.

"This has not been an overnight success: there are a lot of Australian grape growers and winemakers that have been working diligently and quietly without fanfare to innovate and continually improve their market offerings during the last 10-15 years, during which time the economics for Australian wine have been extremely difficult," he explained.

"These activities are very hard to measure, and the turnaround in fortunes which appears very recent, is really a result of a lot of work by a lot of people over a long period of time."

It said the pace of change in the global wine market means we have to look at the situation on a year by year basis. "It would be foolish to bank on growth rates, especially for China, continuing into the distant future," stressed. "We need to remain grounded to the fact that the wine industry has very long supply response times. It takes the best part of 10 years to get a single premium vineyard from planning to a stage where it can reliably produce top quality fruit."

That said the next three to five years "look quite promising". "But Murphy’s Law dictates that trajectory will change, as new variables surface and exert their influence in the marketplace. I don’t know when or by how much, but change is a given, so a sense of perspective is essential." 

He said the Australian bulk wine market has been affected this year by the number of domestic buyers that have come back in to frame.

"What is clear is the increased recent interest from large domestic buyers of bulk wine after many years of absence. For international buyers this changes the game. Domestic buyers are generally extremely well informed, and have the massive advantage of being able to find, taste, analyse and approve wine within very short timeframes – within hours if needed – compared to international buyers. The disadvantage of local buyers is that they come into the market when supply is short and depart when the market is long."

He remains confident that China will continue to be a key market for Australia, but again it needs to be handled carefully and wineriers and brokers should not get too carried away by Australia's recent success there. 

He explained: "Certainly China has been important to the recent turnaround in Australia’s wine fortunes and without China our recent export growth would have otherwise been diminished. There is no doubt about that."

But he stressed "it is very difficult to have clear visibility into the Chinese market, since the market is highly fragmented, supply chains very opaque and demand often quite unpredictable".

He added: "Whether the trend will continue is an open question, but with more and more Chinese people entering the middle class, good growth is a distinct possibility in the short term. Of course, as volume grows, the current high growth rates are much harder to sustain. Furthermore, every market has its cycle and wine is no different."