Lessons for Other Industries from Australia's Booming Wine Industry
Centre for International Economic Studies Discussion Paper No. 0025
46 Pages Posted: 13 Jul 2000
Date Written: May 2000
Opportunities for export-led growth by Australia's rural industries are improving as East Asia returns to growth, agricultural protectionist barriers start to be lowered abroad, deregulation of domestic markets continue, and the costs of international transportation and communications drop. Taking advantage of those opportunities requires a concerted effort, however. It therefore makes sense for rural industries seeking to export their way to greater prosperity to look to lessons that can be drawn from other successful industries. There is no more spectacular success story in Australia than the wine industry during the past decade. The industry's dramatic growth over the past dozen years was initially stimulated by a 30 per cent decline in the Australian dollar's real exchange rate in the first half of the 1980s. In the mid-1980s virtually all segments of the industry were domestically focussed, whereas exports now account for 30 per cent of all wine production. Increased export demand explains much of the industry's growth over the 1990s. This has come about through an increasing emphasis on quality in the industry, sustained generic and brand marketing efforts that have greatly boosted Australia's image as a producer of good value-for-money wines overseas, the development of more-effective distribution systems in key markets abroad, and an autonomous switch by consumers both in Australia and elsewhere towards premium wine (driven in part by health considerations, especially for reds). That success has been achieved despite export growth by other New World wine producers and an environment where global wine consumption is declining. That has been possible because the demand for premium wine has been growing rapidly, at the expense of non-premium wine, and Australia's production is being increasingly oriented towards higher-quality products.
The clearest implication for other industries is that dramatic export-led expansion is possible but not without substantial hard work and large synergistic investments of time, effort and money in all three stages of the production process (primary production, processing, and marketing/ distribution). More specifically, as the illustrations discussed in the paper for the olive and dairy industries show: market niches have to be precisely identified at home and abroad; a long-term vision for sustainable growth, based on sound and detailed statistics, is needed to help attract/retain investment funds; training courses and research need to accompany or preferably precede investments in primary production, processing plants and promotion; and where vertical integration is not complete, good relations between primary producers and processors/marketers need to be developed.
Keywords: Wine industry, export-led growth, WTO multilateral trade negotiations
JEL Classification: F13, F14, Q13, Q17, Q18
Suggested Citation: Suggested Citation