Page last updated at 06:27 GMT, Wednesday, 4 March 2009

Australian wine hit by downturn

By Nick Bryant
BBC News, Sydney

Grapes at McLaren Vale winery, S Australia, March 2008
Australia's economy shows signs of slipping into recession

Australia's economy shrank 0.5% in the last quarter of 2008, the government said, admitting the economy's first contraction in eight years.

Although Australia is not yet technically in recession, global economic woes are hitting home, particularly for the wine industry.

Exports fell 18% in value last year, with the markets in America and the United Kingdom particularly badly hit.

Demand from China had been expected to help fill the gap.

The wine industry hoped that China would become a key new export market, with the Chinese middle classes developing a taste for Australian wines.

But the orders have failed to materialise.

New world

Australian wines have been in the vanguard of what has been dubbed the New World challenge - challenging the traditional bastions of production France, Germany and Italy.

Its red and white wines have developed a reputation for being easy on the palate and easy on the wallet, and sales have been particularly strong in the UK and US markets.

But the value of exports have slumped to recession-hit Britain by 18%. America has seen a 26% drop.

Prior to the global downturn, some Australian vineyards had expanded their production, fully expecting China to become a major new export market.

"The irony is that after years of drought, decent rainfall and good summer temperatures have produced a bumper crop of grapes," said Bruce Marsh from Doonkuna winery near Canberra.

"But the international market has shrunk," he said.

Faced with a slump in exports, the Australian Wine and Brandy Corporation is trying to change the global image of labels from down under.

It is trying to quash the idea that they are simply cheap and cheerful, and promoting some of the boutique labels, which it claims can compete with the best that France has to offer.

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