Wine exporters swallow hard as dollar passes US80c

FOR local winemakers who export large amounts of their vintage overseas, alarm bells usually start ringing when the dollar nudges US80c.

The currency's climb yesterday above the crucial mark for the first time in eight months to US80.9c therefore met with nervous glances from exporters.

The recession means it is not the time to raise their prices in US supermarkets and bottle shops -- so any increased costs borne out of the currency appreciation will be coming out of the producers' margin.

"Overall it is concerning," said Brenton Fry, managing director of Yalumba's export arm, Negociants International.

"If it keeps going it will be a problem.

"It was US93c eight months ago -- if that happens again there would be significant issues."

As the glut slowly dwindles away, the Australian wine industry is moving to correct the mistakes of the past by pushing for fewer producers and a higher-end product.

The recent announcement of a $US3 ($3.70) Australian chardonnay for the US market -- to be known as Down Under -- sent shivers through local winemakers striving to emphasise the quality of Australian wine.

Down Under will be produced by the giant Bronco Wine Company -- makers of the famous "Two Buck Chuck" -- in California using bulk chardonnay shipped from Australia.

Mr Fry said many labels that exported to the US felt pressure from retailers to keep their prices below a certain level, such as $US9.95 or $US14.95.

He said Yalumba would not have to renegotiate its contracts with revised currency measurements for another six months at least.

Michael Hill Smith, of Shaw and Smith Wines in the Adelaide Hills, said the higher end of the market would have more flexibility to deal with the dollar's appreciation.

"Obviously currency fluctuations have a major effect," he said. "From my perspective, it doesn't help but it doesn't make a huge difference, particularly if you are selling a lot of your wines in restaurants."

Shaw and Smith sends about 2000 cases of its wine to the US market, with exports making up at least 30 per cent of total production.

All of its wines there are sold for more than $US20 a bottle.

"Pricing is important but the excitement factor is probably more important in the fine wine market," Mr Hill Smith said. "The secret is to make exciting wines that people want."

Mr Fry said most Australian wineries planned for the dollar to run between US70c and US80c.

"The worry is if it keeps going up," he said.

Paul Henry, general manager of market development for Wine Australia, said the local industry had to push towards recognition of "regions and wines that can command a credible premium".