Growth and cycles in Australia's wine industry

Tuesday, 10 March 2015

In an effort to provide the Australian wine sector with clearer insights from its long history, world-renowned wine economist and University of Adelaide Professor Kym Anderson has compiled a comprehensive statistical account of the sector’s evolution over the past 170 years.

The new book, Growth and Cycles in Australia’s Wine Industry, was jointly funded by the Australian Grape and Wine Authority (AGWA) and the University of Adelaide’s Wine Futures project. It includes annual data that reveal the Australian wine sector’s booms and contractions between 1843 and 2013, along with information on the country’s many wine regions and their evolving winegrape varietal mixes.

Professor Anderson, from the University of Adelaide’s School of Economics, says there have been five distinct cycles in the wine sector’s history that can be examined when strategising about how to return to and retain growth momentum going forward.

“The sector’s development has been characterised by long boom/contraction cycles, around an upward growth trend, with the latest being the longest boom,” Professor Anderson says.

“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. 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, we can’t rely on it 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,” Professor Anderson says.

“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.

“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,” he says.

Mr Andreas Clark, Chief Executive Officer of AGWA, says that the new book will provide valuable historical insights into the Australian wine sector.

“By having a clear economic picture of the Australian wine sector since 1843, we can better focus our market development and our research, development and extension efforts to capture future opportunities,” Mr Clark says.

The ebook can be downloaded for free at www.adelaide.edu.au/press/titles/austwine and print versions can also be ordered from that website.

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