Aussie wines face Asian growth curbs

HIGH taxes in Asia's key markets that lift wine prices by up to 500 per cent are curbing growth for Australian wine exports, says the chief executive officer of Western Australian-based Sandalford Wines.

"A focus on Asia's market potential by wine exporters comes against the economic downturn in traditional European and North American markets and moves to rationalise the Australian wine industry," Grant Brinklow said.

"It is as tough now as it has ever been. I think there are so many factors working against the Australian industry right at the moment," Mr Brinklow said.

"A stronger Australian dollar has also hurt exports. Just five, six years ago Australia was flavour of the month riding high; we had these record wine sales as a country, to the UK, US," he said.

"We've seen over the last few years a combination of the high exchange rates and the success of other new world producers like the Chileans, the Argentinians, South Africans, really starting to impact the Australian industry's success."

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In 2009 Australia's wine exports rose by 9.0 per cent in 2009 to $A2.3 billion, with gains in Asian markets including China, Hong Kong, and Malaysia.

But Mr Brinklow said Asia's market remained challenging for exporters, especially Singapore, Malaysia, and Indonesia, India and Vietnam.

"We've tried the market. Like India, Vietnam is another area. But the barriers to trade, these duties that were facing whether its Thailand or its India, or its Indonesia - they make it seriously hard," he said.

The high taxes on wine left bottle prices largely out of reach of most consumers.

"You have only to walk into a bottle shop there and look at the price of the wine and realise that until something changes as far as those duties are concerned its going to continue to be tough because the price of an average bottle of wine is way above the means of an average person," Mr Brinklow said.

In Indonesia import duties on wine stand at 150 per cent, followed by a 40 per cent luxury tax, a $US2.0 excise duty per bottle, and an additional 4.0 per cent in sales tax. In total tariffs add almost 500 per cent increase in the cost of alcohol.

In Thailand, Australian wine exporters have benefited from a bilateral free trade agreement that has led to tariff reductions from 54 per cent to 40 per cent and are expected to be cut to zero by 2015.

But Thailand maintains a 60 per cent excise tax that results in taxes lifting the price of a bottle of wine by up to 390 per cent.

In states of India taxes on wine include 150 per cent customs duty, 200 per cent excise duty, with a 25 per cent supply chain margin, and a 20 per cent value added tax.

But Mr Brinklow remained positive over China's long-term prospects.

"Sandalford Wines is now tied with a distributor with 100 outlets.

"In 2009, Australian wine exports to China rose 77 per cent ($A$57 million) to $A130 million and is now the fourth largest market for Australian wine exports.

"Sandalford Wines' main market is in the Middle East with sales to Dubai, Abu Dhabi, and Oman reaching 15,000 cases."

But he said the Australian wine industry was set to face a massive change due to a wine production glut and downturn in the United States and European markets.

"It's going to be in my mind a rationalisation of producers at all levels," he said.

But despite the barriers into Asia, Mr Brinklow remained upbeat over the potential for sales.

"This area is the greatest opportunity for wine producers not only from Australia but from all over the world.

"For Asian wine consumers price is important but brand is also important. So as producers like Sandalford is concerned its about brand reputation and how we create awareness,'' he said.

"It does take a long time to build a strong premium brand," he said.