Consumers’ export headache is in rising domestic wine prices

According to the latest estimates (mine), 99 per cent of people reading this column today suffer mild to severe hangovers. If you wonder why the wine that caused it, especially if it was a good red, cost so much more this year than last, then a few real figures just released by the Australian Bureau of Statistics (ABS) provide an explanation.

Booming exports are the culprit. That’s what’s behind higher prices on good-quality wine and even why you may have difficulty finding stocks of your favourite cask.

It’s hard to imagine now, but until the late 1980s the value of wine imports exceeded those of exports, even though imports never made up more than about three per cent by volume of the wine we drank.

Exports took off with a bang after the devaluation of the mid 1980s, growing to 102.8 million litres worth $293.2 million in 1992/1993. Those exports exceeded imports of $47 million by $246.2 million, a massive figure considering we had been nett importers of wine less than a decade earlier.

One or two good years of exports might have little impact on local prices. But sustained strong growth (and more expected) strains supplies to the limit: we exported 54.2 million litres in 1990/91, 78.7 in 1991/2, 102.8 in 1992/93, and reached 114.2 in the first quarter of the current financial year.

In 1990/91 exports represented 15 per cent of total sales by local producers of 350 million litres; in 1992/93, exports were 25 per cent of total sales of 414 million litres.

Those broad figures, though, take into account all styles of wine. In fact, exports are strongly skewed towards table wine, which make up 93 per cent of the 1992/93 litreage. Table wines constitute 79 per cent of domestic sales by Australian wine makers. Exports of table wines, then, account for 28 per cent of all table wine sales by Australian makers. And that’s why the domestic market is being made to pay more for what stays at home.

Despite the weakness of our dollar, the return per litre of wine exported fell by 14 per cent from $3.32 to $2.85 between 1990/91 and 1992/93. It recovered marginally for the first quarter of this year to $2.92. But still, we must ask the question, are domestic price hikes subsidising exports?

Certainly strong exports are forcing shortages of good red wine. I get the feeling from exporters that’s mainly because the pommies (they account for almost half of our exports) have taken strongly to our rich, ripe reds. British wine merchants and writers are common currency in Coonawarra, the Barossa, and McLaren Vale, the main sources of those delicious wines. I’ve seen them there and even been beaten to the punch by them on a few choice parcels of red.

Australian wine drinkers, unlike their fellows in the U.K. and U.S., won’t be rescued from rising domestic-wine prices by imports. Distance, a weak dollar, a high level of duty on imports, and entrenched parochialism, all defeat any hope of relief from the outside world

Wine imports still puddle around at between 2 and 3 per cent by volume of consumption. Although what we import has a greater per litre value than what we export: $5.99 a litre (before freight, duty or taxes) in 1992/93 and $5.14 for the first three months of this year compared with $2.85 and $2.92 for exports in the same periods.

Our imports show a weighting towards sparkling wine, making 30 per cent of the total. Local sparkling wines constitute just 11 per cent of sales of domestic wine sales. This heavy weighting to imported bubbly also suggests a reason for the high value per litre of wine imports as the bulk of it is very expensive real Champagne.

The ABS statisticians believe wine sales are on the decline. But measuring the trend has been made harder by strong swings in sales before and after the budget fiasco. Sales were up 18 per cent before the budget, fell 24 per cent in the month following, then bounced back 19 per cent in October.

Thankfully, making sense of those gyrations is their problem. My personal trend estimate is well and truly up, silly-seasonally adjusted that is.

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