Using the bulk wine market to explain oversupply in the Australian wine industry

Abstract

The Australian wine industry has been suffering the effects of oversupply for many years. Many industry analysts have expressed opinions on which varieties are the greatest contributors to the problem. This paper presents a hedonic price analysis of the Australian bulk wine market, to determine if empirical evidence verifies the opinions of industry groups and participants. The bulk wine market is chosen because it is the market for stored wine, and it is where surplus production often eventuates. Results appear broadly in line with analysts' assertions, and suggest that, although many varieties are overproduced, some may be experiencing excess demand. Solutions to the problem that involve reducing grapewine area by the level of surplus production may not be fully required. A more appropriate alternative may be to reallocate production from varieties that are in oversupply, to those that are experiencing excess demand.

Acknowledgements

The author gratefully acknowledges the input of his PhD supervisor, Associate Professor Fredoun Ahmadi-Esfahani, and the comments provided by an anonymous referee for this journal.