Australia's wine industry is heading for another record vintage in 2001, but faces its first hiccup in more than a decade as supply looks set to outstrip demand.
Australian wine has surfed an export wave in recent years, boosting annual offshore sales to nearly A$1.5 billion (US$825 million) in 2000 from about A$234 million 10 years ago.
Its only problem had been how to meet rising demand.
While exports are still growing strongly, a recent stampede to plant new vineyards by investors means the rate of supply is now set to outpace sales growth.
Winemakers Federation of Australia policy director Stephen Strachan said 2001 looks like being the industry's most challenging year for some time and a test of its marketing power.
"This year it looks like a double impact, with the new plantings coming on in conjunction with relatively high yields which will stretch the industry's capacity to process and then also its capacity to market," Strachan said.
"Prices will adjust, and product will move, but whether it's profitable to everyone is the question."
In response the industry has released a new marketing drive to diversify its markets, aimed mostly at the United States and Germany as its best market, the United Kingdom, matures. The goal is to reach annual exports of A$3.4 billion by 2010.
SET FOR RECORD HARVEST
Disastrous weather aside, this year's vintage, which runs from late January through to April, is likely to produce an Australian crush of about 1.3 million tonnes, up from 1.13 million last year when poor weather conditions affected yields.
Vintage growth has been as dramatic as wine sales for the Australian industry, with about 40,000 hectares of new vineyards planted between 1996 and 1999, almost doubling the crush from the 700,000 tonnes harvested about 25 years ago.
Brian Johnston, wine operations manager for Southcorp Ltd, Australia's leading wine producer and maker of the Penfolds brand, says the 2001 vintage generally is looking "very favourable" across the country, with the possible exception of parts of New South Wales state, where heavy rains fell.
Southcorp, which crushed 210,000 tonnes in 2000, does not release forecasts but said it was looking at growth.
"We are expecting a significant increase in tonnes over 2000 vintage, and the proportion of premium varietal wines over bulk varieties is expected to increase further," he said.
Australia's BRL Hardy Ltd is also looking to a best ever vintage, with plans to crush 250,000 tonnes of grapes, up from last year's 218,000 tonnes.
Australia exported 307 million litres, worth A$1.46 billion in the year to November 30, 2000, the Australian Wine and Brandy Corporation saidIt was currently about 20 million litres behind target if it wanted to keep up with increased supply for 2000-01.
One industry source, who did not want to be named, said he did not anticipate a surplus of premium red or white wine "in the foreseeable future", but he expected this year to see too many "bottom end reds" from non-premium growing regions.
The booming industry had attracted investors in recent years who pumped money into developments across regions and were currently managing them "for volume not quality", he said.
"Because of the shortages of reds to date, they've been getting top prices for pretty ordinary fruit, but I think that cycle will turn significantly this year," he said.
(A$1 = US$0.55).