Less on the vine but lid stays on wine price hikes

David Dearie, chief executive at Penfolds, Wolf Blass, Lindemans and Rosemount parent company Treasury Wine Estates, last week warned Australian wine grape prices had risen by 11 per cent this year, which could flow through to higher retail prices.

But other wine industry leaders say the market power of the dominant Woolworths and Coles retail chains, which between them control about 60 per cent of the packaged liquor market, is likely to contain any price inflation.

Winemaker Phil Sexton, of Giant Steps in the Yarra Valley, says big retailers are tending to decrease prices despite grapes being scarcer
Picture: Aaron Francis Source: The Australian

Winemaker Phil Sexton, from Giant Steps in Victoria's Yarra Valley, said his grape prices were up about 10 per cent this year as improving sentiment in the industry boosted demand for fruit.

"There's more demand, and a fair bit of pressure on price, especially for varieties like pinot noir and pinot gris, which are getting very hard to get hold of and very expensive," he said. "But the general trend among the big retailers is to decrease their selling prices, so it's a difficult discussion -- single vineyard wines where there is some scarcity might be exempt from that, but for wines made in any quantity, trying to get an increase in price at the moment it is a very hard negotiation."

Wine Grape Growers Association executive director Lawrie Stanford said growers had been selling grapes for less than the production price for three years.

Shane Tremble, industry relations manager at Woolworths Liquor Group, said any upward movement in wine prices was likely to be minimal. "We wouldn't expect a 10 per cent increase in grape prices to have a significant effect on retail wine prices -- it will barely be noticeable, cents rather than dollars," he said. However he predicted the demise of $2 "cleanskin" wines as winemakers were no longer forced to sell off surplus wine at fire-sale prices.

Winemakers Federation chief executive Paul Evans said any move to higher prices could be short-lived, as just one average harvest of around 1.75 million tonnes could put the industry back into oversupply after intakes of 1.53m and 1.66m in the past two respective vintages. "The annual crush has been down for three years, but if we go back to a normal vintage all of that progress could be unwound very quickly," he said.

Source: The Australian, 4 December 2012