AUSTRALIAN wine production is forecast to drop by around 15 per cent over the next five years, but there is no reason for alarm, said Vinexpo which commissioned the report by International Wine and Spirit Research (IWSR).
"Australia for two decades has shown incredible growth around the world but is plateauing now and there's an adjustment on the production side which is totally normal," said Xavier de Eizaguirre, chairman of wine fair Vinexpo, which is being held in Bordeaux in June.
"It doesn't mean Australia is in trouble in terms of exporting, it just means there's a correction after years and years of spectacular growth," he said.
The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said wine grape production declined from about 1.8 million tonnes in 2007-08 to an estimated 1.58 million tonnes in 2011-12.
This year, ABARES forecast wine grape production in Australia would rise slightly to just over 1.6 million tonnes and would be slightly higher again in 2013-14. The local wine industry is still coming to grips with a persistent wine glut that has fed the market for cheap wine as the high Australian dollar forces local winemakers to head upmarket.
The company behind export success story Yellow Tail - Casella Wines - plunged to a $30 million loss last year as it tried to maintain market share in the US despite the high Australian dollar. The company has flagged a new strategy to produce premium wines targeted at the Asian market.
The IWSR study does not include export forecasts but does reveal that between 2007 and 2011 Australian exports declined 13.3 per cent from 89 million cases to 77 million. In monetary terms the value of Aussie wine exports fell 20.9 per cent to $1.89 billion in 2011-12. This is down from a peak of $2.68 billion in 2007-08, according to ABARE.
Nevertheless, Mr de Eizaguirre insists the picture is positive for the local industry. Winemakers will move to more specialised or boutique labels that eventually will lead to a more sustainable and profitable sector, he said. "It will take a while for the Australian industry to adjust to the new trends, but it will translate into less volume, better qualities and higher prices."
The IWSR study reveals Chinese consumption of imported still wines grew in the five years to 2011 by more than 550 per cent by volume. And it is forecast to expand a further 62.7 per cent by 2016.
But there will be challenges on this front. China's wine import growth is expected to slow in coming years despite expectations that it will be the second biggest consumer of wine by 2016.
Local wine production is expected to fill the gap, with China expected to displace Australia as the world's sixth largest wine producer by 2016, according to the IWSR report.