Wine Industry Report

Value growth outstrips volume growth
Australian wine export value growth outstripped volume growth in 2007. Value grew 6% to hit A$3 billion and
volume grew 3% to reach 785 million litres. While the incremental volume growth of 26 million litres was the smallest
since 1997, the incremental value growth of A$178 million was the largest since 2004. The strong value growth was
on the back of a 3% increase in average price to A$3.83 per litre, the first time average price has increased on a
calendar basis since 2002.

(Note: MAT – Moving Annual Total)
Contributing to the increase in average price was an increase in the share of bottled wine in the export mix (up 4
percentage points to 74%). This was a result of a decline in the lower-priced bulk shipments more than offset by solid
growth in the volume of the relatively higher-priced bottled wine shipments.

Bottled wine accounts for volume growth
Bottled wine shipments accounted for all volume growth during the year. Bottled shipments grew 10% to 580 million
litres. Bottled reds were the leading growth category, up 12% or 40 million litres to 371 million litres. White bottled
wine grew 4% or 8 million litres to 190 million litres, whilst sparkling wine grew 19% or 3 million litres to 17 million
litres.

Despite the increased demand for Australian bottled wine in 2007, market competition and unfavourable exchange rates
have placed downward pressure on bottled unit values with a 1% decline in the average price to A$4.77 per litre. Red
bottled wine declined 1% to A$5.03 per litre, whilst white bottled wine declined 2% to A$4.22 per litre and sparkling
declined 6% to A$5.15 per litre.

Driven by continued rises in global commodity prices and a strong domestic economy, the Australian dollar appreciated
significantly against the world’s major currencies between January and November 2007. The Australian dollar
increased 15% against the US dollar (reaching 0.92 in October, a 17 year-high), 9% against the British pound (to reach
0.43 in November) and 1% against the Euro (to reach 0.60 in November). This adversely effected the competitiveness
of Australian wine in Australia’s key export markets, particularly the US and UK, where there is already intense
pressure from lower-priced competitors.

Marked decline in bulk shipments
Shipments of bulk wine declined 9% or 18 million litres to 195 million litres in 2007. The average price of bulk wine
increased 4% to A$1.09 per litre. The strengthening Australian dollar and a low yielding 2007 harvest resulted in a
significant decline in bulk wine shipments to the US, Canada, China and New Zealand. Bulk shipments to Western
Europe continued to grow due to the strong presence of buyers-own brands in these markets and the lower appreciation
of the Australian dollar against the Euro.

UK volume strong, average price falls
The UK market remained the number one ranked export market by volume and value. Volume grew 9% to 290 million
litres and value grew 6% to A$985 million. Contributing to the 9 cent decline in average price to A$3.39 per litre was
the 12% growth in bulk wine volumes and a 2% decline in the average price of bottled wine.

US volume and value declines but average price grows
The appreciation of the Australian dollar against the Greenback contributed to the decline in shipments to the US.
Volume declined 7% to 204 million litres driven by a sharp 57% drop in bulk wine shipments. Value declined 2% to
A$917 million. The average price across all container types fell, but the increased share of higher priced bottled wine
shipments in the export mix (increasing 12 percentage points to a 90% share) resulted in a 7% increase in average price
to A$4.49 per litre.

Shipments boom to The Netherlands
Volume shipped to The Netherlands almost doubled in 2007, growing 92% or 14 million litres to 28 million litres.
Bottled shipments grew 95% to 23 million litres with bulk shipments up 83% to 5 million litres. Value grew 77% to
A$82 million while the average price declined 8% to A$2.88 per litre.

Strong demand in Western Europe
The demand for Australian wine in Western Europe grew in 2007, with strong growth in shipments to Ireland,
Germany, Denmark, Belgium and Finland. Exports to Ireland grew 29% or 4 million litres to 16 million litres on the
back of solid gains in bottled wine. In contrast, growth in bulk shipments was the main contributor in increased
shipments to Germany (up 6% or 2 million litres to 37 million litres), Denmark (up 17% or 3 million litres to 21 million
litres), Belgium (up 27% or 2 million litres to 10 million litres) and Finland (up 31% or 1million litres to 5 million
litres).

[Source: AWBC. Peter Bailey – Senior Analyst, AWBC | Rodney Cargin – Analyst, AWBC]