Contact: Nicholas Stevens
Deloitte
Director and Wine Industry Analyst
0410 045 281

Contact: Chris Jenner
Deloitte
Media Relations
08 8407 7131

Signs of a bumper 2006 harvest across most Australian wine regions means wine lovers will be spoilt for choice this summer with many wineries and wine outlets set to offer great wine at low prices.

With Australia producing two large vintages in the last two years, industry analysts had predicted earlier this year that the 2006 vintage would follow historical trends where yields are typically lower than average for one in every three years. However, as we head into 2006, Australia’s leading wine regions are predicting a vintage along similar lines to 2004 and 2005.

This expectation has forced wineries to clear their storage tanks and many are now offering deals to distributors, retailers and the public in an effort to sell excess wine and prepare for the 2006 vintage which commences in February.

Deloitte Industry Analyst, Nick Stevens, who drives the Deloitte Winemakers Federation of Australian Annual Financial Benchmarking Survey, said "Wineries have been forced to offer wine from dry-grown regions at the price of irrigated-region wine. The result is plenty of high quality and affordable wine available for consumers.

"With many large Australian wineries reporting reduced profitability and margin erosion, the only benefits seem to lie with the retailer and the consumer. Sales on the bulk wine market have also slowed due to the low prices being offered which has reduced the opportunity to sell excess wine. This has forced the larger wineries to reconsider their grape supply contracts and the amount of wine they can physically take-in for the 2006 vintage." Mr Stevens added.

The prospect of a strong 2006 vintage has also combined with the continued consolidation of Australia’s larger wineries and retail consolidation to benefit the wine consumer further, as retail prices of some of Australia’s leading brands have been heavily discounted within the chain liquor outlets.

The aggressive pursuit for shelf space by Australia’s ‘mega-wineries’ has affected many of Australia’s small and medium sized producers. The results of the 2004 Deloitte / Winemakers Federation of Australian Annual Financial Benchmarking Survey indicated that almost one in two of these wineries were losing money and many wineries are now employing aggressive sales strategies which often results in a better price to the end consumer.

However, concerns over supply and demand were again raised at the Wine Industry Outlook conference in November 2005, where the Australian Wine and Brandy Corporation stated that Australia’s wine oversupply is likely to take up to five years to come back into balance. Wine consumers could therefore reasonably expect the current low prices and discounting to continue for some time to come.