Date: July 21 2012
YOU know things are going well when the Chinese start pirating Australian wines at $500 a pop. Last month the historic Barossa winery Henschke became the latest Australian winemaker to be smacked with this backhanded compliment.
A stand at a wine fair in Beijing was promoting Hill of Glory by Henschke. The winemaker's flagship wine is of course Hill of Grace.
Treasury Wine Estate ran into similar trouble in 2010 when it came across a Benfolds wine with nearly identical packaging to its flagship Penfolds.
It sounds like music to Australian ears, except for the fact that only a few winemakers can play in territory that is largely the domain of France's first-growth wine producers.
The bulk of Australia's wine industry still finds itself caught between a world-beating Australian dollar, crippling oversupply, and other New World wines that are eating up the budget end of the market where Australian producers can no longer afford to play.
The latest export figures from Wine Australia report signs of progress, but also indicate Australia's scramble from budget territory to the premium end of the market is still a work in progress.
According to Wine Australia, total export volumes dropped slightly in the year to June, down 2 per cent to 713 million litres, with a decline in bottled wine exports offset by a rise in bulk wine exports. On the plus side, the average value per litre of Australian bottled wine increased 4 per cent to $4.40 for the year, while the value of bulk wine was up 4 per cent to $1.01 a litre.
A key driver of this rise in value - and bulk wine exports - was canny producers exporting more of their budget wine in bulk, then bottling it in destination markets such as the UK and the US.
But the increase in value of bottled wine also reflects the fact that premium wine exports are growing. Bottled exports above $50 a litre increased 17 per cent, and it was not just China driving the premium growth.
The strongest growth rate for Australian wines in the UK market last year was in the £7-plus category, which was up 26 per cent.
The $20 a litre price segment in the US was up 5 per cent.
But all eyes are on China. A draining of Australia's wine glut led to a slashing of bulk wine exports to China by 65 per cent last year, while bottled wine exports rose by 21 per cent to 32 million litres and the average value rose to $6.23 a litre.
And while Treasury Wine's $1000 bottles of Bin 620 are doing great business in Asia, the company is not losing sight of the fact that it mainly serves as a beachhead for the growing middle class market it needs to target.
But Asia's growing middle class is no near-term saviour for Australia's wine industry, which is still threatened with oversupply, according to Lawrie Stanford, the executive director of Wine Grape Growers Australia.
The Winemakers Federation of Australia forecast that this year's harvest would reach 1.66 million tonnes, up from 1.6 million last year.
According to Stanford, only 5 per cent of Australia's vines have been removed, which means the industry is still capable of producing 1.75 million tonnes of wine grapes a year.
''The last two harvests are down principally because of seasonal factors,'' he said.
If there is any upside, it is that the quality of this year's harvest is much better than last year's ''season from hell'', he said.
Not that the industry will be the beneficiary of that.
''Consumers will end up with a lot better value,'' Stanford said.
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