A DIVERSE SET OF PRODUCTS AND SERVICES RELATED TO THE WINE INDUSTRY

A Diverse Set of Products and Services Related To the Wine Industry

A diverse set of products and services related to Wine Industry

The Australian wine industry has experienced remarkable change since mid-1980s. In mid 1980s, Australia exported 2% of total production and was the net importer of wine. Since this time, industry presentation has been spectacular. Exports now total 32% of total production (compared to 17% for major producers, France and Italy). (The World Wine Business 1999:47)

Australia makes only 2% of world wine, but now holds 2.4% of world wine market by volume and 3.5% by value. How is this presentation to be explained? A decline in value of Australian dollar was one stimulus. Another factor was change in industry ownership affecting structure and scale of individual firms. Other changes affected industry's overall business orientation, its general engagement with international markets and its commitment to innovation. Industry collaboration has facilitated, or contributed to, last three of these changes. (Cambridge 1998:197)

The Australian wine commerce has performed amazingly in latest years. Australia produces only 2% of world wine. In mid 1980s, Australia was the net importer of wine. Exports now total 32% of total production. Australia now holds 2.4% of world wine market by volume and 3.5% by value. Australian wineries hold 11% of U.K. market, 7% of Japanese market and 4% of German and US markets. Exports go to the total of 82 countries. Thirty-eight per cent of 1431 winemakers in Australian and New Zealand Wine Industry Directory (ANZWID) export. Over this same period, sales have shifted from bulk and cask to semi-premium ($7-10 per bottle) and premium ($10-15) segments. For third time, in January 1999, Penfold's Grange appeared on front cover of US Wine Spectator, arguably most influential wine magazine in world. In this issue, three Grange vintages were included in its 'dream dozen.' How are these developments to be explained?

The decline in Australian exchange rate in mid-1980s influenced demand. Australia's natural endowments or advantages might also be cited - as in theory of comparative advantage. Tastes and incomes in consuming markets may have moved in favor of Australian styles - although speed and ubiquity of supply response would remain to be explained. In an analysis of industry growth in 1986-96 periods, Wittwer and Anderson note key role of switch from non-premium to premium grades and consequent increase in price and revenues (43% for wine and 116% for wine grapes). This switch occurred in early 1990s - seven years after fall in exchange rates. They conclude that export demand accounted for half of industry's premium output growth and domestic income growth the further 20%. The extensive adoption of mechanical harvesting and pruning is also cited as an influence. (Marceau 1997:6)

In process, wine industry has transformed itself. It has ceased to be composed solely of rivalries, competitive firms. Fierce competitive rivalry between one-by-one producers persists. But this has been supplemented by commerce collaboration round matters of distributed ...