Australian wine ‘cheaper than water’

Wine is being sold for less than the price of bottled water at a number of Australian retailers, with a dip in international demand having driven down prices.

As reported by the BBC, wine has been found on sale in the bargain buckets of one Australian retailer for just one Australian dollar – the equivalent of 53p. A 350ml bottle of water sells for around AU$2.50 in the country.

The BBC also reports that a well-known Australian white wine is selling for AU$2.99, while four-litre bag in box wines are on sale for less than AU$17.

Wine prices have plummeted in Australia due to a dip in international demand caused by the strength of the Australian dollar against the American dollar, which has led to a glut in the domestic market.

“A lot of the export volume that we were previously selling to overseas markets has come back to the domestic market as international demand for our wine has dropped off, Paul Evans, chief executive of the Winemakers’ Federation of Australia (WFA), told the BBC.

As a result, competition between local wine producers has increased.

The Australian tax system on alcohol has also contributed to the problem, with wines sold at cheap prices only taxed a small amount rather than being taxed on their alcohol levels.

Also exacerbating the problem is the competition between Australia’s two major retailers: Woolworths and Coles, which together account for over 70% of the country’s wine sales.

“There is a considerable mismatch between the market power of the retailers and winemakers, which is negatively affecting the industry as a whole,” Evans told the BBC.

“It reflects in margins and profitability for winemakers, which cascades down to grape growers. We’ve seen very low profitability there, and in some cases, loss-making at both of those levels in recent years,” he added.

The WFA is working with the government to try and tackle the problem.

“The situation is disconnecting the important link in a consumer’s mind between the quality of wine and the price they’re paying for that wine,” Evans said.

“It’s going to be very hard for consumers to go back to pricing that’s more relative to the intrinsic value of the quality of that wine they’re consuming,” he added.