Australian wine oversupply a problem

11 January, 2008

Oversupply of cheap Australian wine continues to affect the UK market adversely, according to drinks giant Constellation Brands.

President and chief executive Rob Sands said in a statement issued around the quarterly profits announcement: "We are continuing our efforts in the UK to mitigate the impact of the lingering Australian wine surplus in the marketplace and to maximise profitability."

The US company has reported an 11 per cent boost in net profits for the three months to Nov 30, 2007.

Constellation, which owns top-selling brands including Hardys, Kumala and Stowells, said net sales for branded wine in Europe had increased by 4 per cent, including a "slight increase in net sales for the UK".

The branded wine market in the UK continues to be tough becaue of "competitive challenges and continued pricing pressure", Constellation added in its statement.

Fortune Brands' wine business, which Constellation bought last year, is to be integrated into the company.

Australian wine export value growth outstripped volume growth in 2007, according to the latest report from the Australian Wine & Brandy Corporation.

Value grew by 6 per cent to AUS$3 billion in July, while volume grew by 3 per cent to reach 785 million litres.

The UK remained the number one export market in volume and value, with volume growing 9 per cent and value growing by 6 per cent.

The first half of this year will see changes in leadership at Wine Australia, with a new board and chief executive appointed.

Current chief executive Sam Tolley is to step down after 13 years at the helm.

"It has been an exciting time but also a hectic time and I think I am ready to follow up new interests," Tolley said.

"I am very satisfied with what the corporation has achieved, as I am with its sound financial position, and I am extremely positive about the sector's future."

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