The Australian wine industry is not alone in feeling challenged during the past few years. Common contributors include the following:
• economic recessions on both sides of the North Atlantic,
• a chronic oversupply of winegrapes and wine in the European Union,
• retail concentration of supermarkets in many high- and middle-income countries, with the largest developing their own labels by buying bulk wine
• tight regulatory environments for wine distribution in such settings as Ontario, many of the US states and Scandinavia
• expanding supplies in emerging markets such as China
• consumer health and environmental concerns
• anti-alcohol campaigns by health and road safety lobbyists, and
• great uncertainties resulting from climate change and associated policy responses.
On top of those common challenges, Australian producers have had to deal also with such things as:
• a high-valued currency (thanks to the boom in industrial raw material and agricultural exports to China) that has made Australian wines less competitive abroad as well as at home in competition with imports
• large stocks of unsold wine (thanks to the rapidity of the latest boom's vineyard acreage expansion coupled with a slowdown in global demand)
• a fashion swing against Australian wines in the UK and US
• a fashion swing toward New Zealand's Sauvignon Blanc, and
• major reforms to irrigation water institutions and policies.
Symptoms of those difficulties for the Australian industry include large declines in winery profits, the cut in winegrape prices particularly in the hot irrigation areas, more than 15% of domestic sales being supplied by imports (compared with just 3% at the start of the millennium), and almost three-fifths of Australia's wine exports in 2014 being in bulk containers (compared with 15% in 1996-2003).
Climate change also is likely to be a bigger challenge for Australia than for many other wine-producing countries. The majority of Australia's winegrapes are produced in the hot irrigated regions around the Murray and Murrumbidgee Rivers (see Chapter 2). Those regions, like most of southern Australia, are becoming warmer and drier, and have seen a slowdown in river flows.