The deep crisis of US and Australian wineries

The 2009 was the year of cheap wines. Shipments of California wine fell for the first time since 1993 and Australian winegrowers have been forced to let their grapes wither on the vine

It’s difficult to understand the US wine market in the last months.

In 2009 consumption of wine was up slightly, 2.1 percent to 323 million cases but wine is not more considered a luxury.

Buyers who once spent $20 to $30 for a bottle now have moved lower.
The $3 to $6 category and the $9 to $12 category have seen the strongest growth.
The amount of imported bulk wine increased to 25 million cases, an 87% jump over the prior year. This helped push imports' share of the market to an all-time high of 104 million cases, or 32% of the market.

The retail sales slowed, distributors started to shrink inventories and require tighter credit. So, at the same time, a lot of wine cellars have been trying to figure out how to discount wine to reduce inventory.

It’s not so difficult to find top wines offered by restaurants to serve by glass or sold at lower wholesale prices.

shipments from California edged down 1.6% to 236m cases – their first decline since 1993

California wine shipments dropped in 2009 for the first time in 16 years as major U.S. wine companies looked overseas for the cheap wines that cash-strapped consumers increasingly crave.

But California wines lost ground as sales fell 1.6% to 236 million cases, a drop of 4 million cases, their first decline since 1993, according to widely-watched figures issued Wednesday by Woodside wine industry analyst Jon Fredrikson.

For small- to medium-sized wineries, the year was “brutal,” as consumers shunned higher-priced wines, powerful distributors focused on big brands, and the global recession hurt exports

Traditional wine-drinking nations, such as France, Italy and Spain, are all facing dropping domestic consumption, making those nations look for new markets for their wines.

Meanwhile, the New World wine industries, as Australia ones, have far lower production costs but international recession forced Australian winegrowers to let their grapes wither on the vine.

Australia's wine exports amount to some 2.8 billion dollars (2.5 billion US) each year, with the United States and Britain the dominant markets.

The country needs to lose 20 percent of its vineyards to counter the glut, which, coupled with a strong Australian dollar, has left the industry facing its worst crisis in decades, the Winemakers' Federation of Australia (AFP) said.

"The over-supply is in the order of magnitude of about 20%of the industry," chief executive Stephen Strachan told AFP.

In opinion of Winemakers' Federation of Australia, the Country was producing too much wine from as far back as 2002, but only in a significant way since 2005 adding that the long-running drought across much of the country had not helped the problem.

Lot of analysts said that the wine market should grow significantly in 2010 but it will be sufficient to save small and medium wineries?