Australian wine expert Wolf Blass has called for a global marketing campaign to bolster wine sales, as manufacturers continue to struggle domestically.
Research from IBISWorld released late last month shows the Australian wine production sector has faced difficult trading conditions over the past five years, with the industry declining at an annual rate of 1.9%.
Speaking at an American Chamber of Commerce forum late last week in Adelaide, wine patriarch Wolf Blass called for Australia’s 2500 winemakers to contribute to an international marketing fund to help boost the sector.
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“To succeed in business we need promotion and something terrible will happen if we don’t,” Blass said, as quoted in The Australian.
“We’ve got no funding to promote the industry…we should have a levy on most winemakers. There are a lot of parasites in this country who don’t contribute to the marketing of their product.”
The wine production industry currently generates $5.7 billion in revenue and over the next five years this is predicted to remain relatively flat.
“Exports have been hurt by volatile economies in key export markets, a soaring Australian dollar (which has made industry exports uncompetitive) and rising competition from new low-cost wine producers,” IBISWorld says in its report.
“Manufacturers are losing bargaining power against supermarket giants and consumer preferences are changing… A vast oversupply of wine and wine grapes has forced down prices, squeezing profit margins and forcing many producers out of business,” it said.
The impact of the tough trading conditions has been heavily felt, with a number of sizeable businesses being placed in administration in the past two years.
In January this year Barossa Valley Estate was placed in receivership, with reported debts of $20 million.
In late 2012, the historic Buller Wines was also placed in administration. The winery was a fourth generation business with the original vineyard established in 1921.
Blass said to help the industry the government should abandon its wine equalisation tax which lets New Zealand manufacturers claim a rebate on wine exported to Australia.
“The black sheep are the New Zealanders, they’ve flooded the market domestically and they’re having 13% of the market imported into this country.
“We pay them a rebate and import their product … the tax is hurting us: we need the $30 million to promote ourselves overseas,” he said.
Blass’ company is one of Australia’s largest wine exporters and he is a two-time winner of International Winemaker of the Year. He’s also won the prestigious Jimmy Watson Trophy on four occasions.
Winemakers’ Federation of Australia chief executive Paul Evans previously told SmartCompany over the past few years the sector has battled high exchange rates and increased competition.
“Domestically, we are faced with a highly consolidated retail sector and fierce competition amongst producers with the own brands of retailers and increasing numbers of imports.
“With so much competition domestically, all companies need to find their particular niche and speciality and focus on that,” he said.
Over the past 10 years, IBISWorld found a number of new producers have also impacted upon the competitiveness of Australian wines overseas.
“Wine producers such as New Zealand, Argentina, Chile and more recently South Africa have taken advantage of lower costs and rising popularity to supplant Australian wines in major wine-consuming markets,” the report said.
But Peter Mace from the Australian Institute of Export told SmartCompany earlier this year opportunities do exist in China.
“There are good opportunities to build up market share of the wine industry in China. While many winemakers have been struggling in the European and UK markets, the Chinese are keen on good labels,” he said.