Australian companies are snapping up wineries here and seeking acquisitions and partnerships abroad to take advantage of phenomenal growth projected for markets overseas. Analysts and executives say the trend is part of a worldwide consolidation in winemaking and marketing.
"It's gone global," said Malcolm McComas of Grant Samuel, a specialist investment banking firm.
Even Foster's Brewing Group, Australia's dominant beer maker, is diving in. The company, which bought Beringer Estates of California last year, now puts US$6 of every US$10 it invests into wine. The wine sector is now so important to Foster's that last week the company said it would drop the word "brewing" from its name, effective July 1.
Foster's largest rival, Lion Nathan, is also expanding into wine. The company's chief executive, Gordon Cairns, has set his sights on a New Zealand winemaker, Montana Group, and is battling Allied Domecq of Britain over a controlling stake in Montana.
Southcorp, an Australian conglomerate, jettisoned its packaging operations a few months ago and is weighing a sale of its water-heater business to concentrate on wine.
The first quarter marriage with Rosemount Estates, a family-owned Australian wine powerhouse with an international reputation, made Southcorp one of the world's largest producers of premium wines; it accounts for half of Australian wine exports.
All these companies have American wine drinkers on their minds. "The US market is the key to global consolidation in the wine industry," said Chris Day, chief executive of the International Wine Investment Fund, citing strong demand and healthy profit margins there.
That is especially true for Australian producers, who have gained an immense cost advantage because prime vineyard land in Australia is cheap compared with the best vineyard acreage in the US and Europe -- and the exchange rate is near an all-time low. "There's a huge opportunity for Australian wine to come in at US$0.50 on the dollar," said McComas, and for Australian companies to "provide excellent wines at US$10 a bottle."
Australian varieties now account for about 13 percent of US wine imports, up from less than 3 percent five years ago, and even if the growth trend tapers off, Australia is well on the way to becoming the US' leading source.
"My view is that Australia will be the dominant imported wine in the US market in the next five years," said Stephen Millar, managing director of BRL Hardy, a major Australian producer.
RSS