Bargain prices as wine sales slow

WINEMAKERS are starting to put premium-quality grapes into cheaper wines as global demand for our fine wines plummets.

A severe drop in Australian wine exports caused by the global financial crisis has caused winemakers to resort to the measure, wine industry leaders said yesterday.

 Australia's wine exports dropped a massive 26.3 per cent in November, as drinkers in the recession-hit U.S. and Britain – by far our biggest wine markets – closed their wallets.

But Jim Barry Wines proprietor Peter Barry said consumers would be the winners from the downturn.

"I think people will see prices drop in Australia, or they will end up drinking better-quality wine for the same price," he said.

Mr Barry said that this year as much as 80 per cent of his McRae Wood shiraz, which retails for $50, would be used in The Lodge Hill shiraz – which can be snapped up for less than $20.

"Certainly if we are not selling the premium-quality wine at the other end, then we will make less of it and put the higher-quality wine at a lower price point," he said.

Winemakers Federation of Australia chief executive Stephen Strachan said he expected the situation to last for about 12 months.

"We have got some very good wines that are essentially being sold at lower price points because consumers are going to be looking more in that range," Mr Strachan said.

"It is the consumers who dictate price and it is quite likely consumers will trade down and instead of buying a $20 bottle, they'll buy the $10 or $15 bottle."

Mr Strachan said chardonnay, in particular, was one variety which would be value for money.

"Chardonnay is in significant over-supply at the moment, so if you are looking for a good deal it is chardonnay," Mr Strachan said.

"It is an excellent opportunity for consumers to get out and rediscover some great Australian wines."

It is the second crisis the Australian wine industry has incurred in the past few years.

The industry was afflicted with a so-called "lake" of wine in the first few years of this decade – a glut which was tempered to some extent by the drought and a surge in non-premium wine exports.

Mr Strachan said the financial crisis was likely to result in another wave of rationalisation in the industry.

"I think we are going to see over the next 12 months the wine industry make some adjustments and go through some rationalisations, but given the volatility in areas such as exchange rates and the economic crisis, it is difficult to know what the extent of that will be," he said.

In mid-December, wine grape growers in the Riverland district were warned the prices they would be paid for their grapes would fall by at least 30 per cent – in many cases below the cost of production.