Consumers win wine war

A NEW price war has broken out in the wine industry thanks to a large 2008 vintage, increasing retail competition and the economic downturn.

Retailers are offering discounts, specials and promotions.

Sales of premium bottled Australian wine on the domestic market are down by more than 4 per cent for the past 12 months, while total Australian domestic wine sales are down about 3 per cent. The problem has been exacerbated by brittle overseas markets. The latest international problem to emerge is in the United Kingdom with concerns that supermarket giant Tesco is imposing tougher conditions on wine producers. English newspapers have foreshadowed a supply revolt against Tesco which has introduced "take it or leave it" terms to protect profit margins.

However, Liquor Stores Association of SA president, Fred Hamood from Hamood's Plonk, said the Australian market is very difficult. "It's also a very price-oriented market with people very wary of how much they spend," he said.

Hamood's Plonk employee Brodie Blyth said it had a wide range of specials offering prices well below normal. They included wines such as Angove's Long Row Sauvignon Blanc for $7.99 a bottle (normally ($9.99), Peter Lehmann Shiraz $13.99 ($19.99) and Rosemount Diamond Label Shiraz $9.99 ($14.99).

Australian Wine and Brandy Corporation manager, information and analysis, Lawrie Stanford said the credit crisis had started to bite in the past quarter.

"Consumer behaviour in economic crises is a little bit hard to pick because people respond in different ways," he said. "The evidence is strengthening that the consumer is heading south in terms of price points."

"Prices are also pushed down by increasing competition between retailers and a large 2008 vintage."

Australian producers are also facing rising production costs, he added.