Still reeling from China's gut punching import tariffs imposed in 2020, Australian winemakers now face the sobering prospect of long term freight, energy and bottling cost hikes.
Vineyard production costs are also rising fast because of soaring fertiliser and fuel prices and labour shortages, adding more pressure points to wine's eventual retail price.
That, in turn, will test local and overseas consumers' appetite to pay, and their loyalty to Australian wine labels, warns agribusiness lender, Rabobank.
While some cost current movements should settle down in the short-to-medium term, Rabobank foresees other hikes as long term structural changes which may get far more expensive.
"Today's global wine industry has evolved in a context of cheap freight, cheap energy and declining trade barriers - all of which are now being called into question," said the bank's global beverages strategist Stephen Rannekleiv.
Adding further stress was the strong chance of more geopolitical disruption and trade barriers for our wine exports, like China's 200 per cent tariffs.
Mr Rannekleiv said wine producers' immediate response to many disruptions in the past two years, including the coronavirus pandemic lockdowns, rising fuel costs and freight delays, had been "more tactical than strategic".
"We'd argue energy prices and geopolitical factors are more structural in nature and any future 'solutions' should take these into account," he said.
"Old assumptions which form the basis of the current wine business operating model should be questioned. The rules of the game are different."
Too many grapes
His comments coincide with diversified NSW Hunter Valley winemaker, Michael Hope, telling NSW Farm Writers Association the big volumes of winegrapes harvested in Australia were already well out of alignment with our wine market options.
"Australia makes a lot of good wine, but it's not a low cost producer and we need big and consistent export markets to absorb our output.
"Unfortunately, our production is higher than our potential sales - a situation made much worse by our exports to China falling 97pc last year.
"The oversupply problem is not just here. It's a global issue.
"Unlike wheat growers, a vineyard can't just switch to another crop next season if grape prices fall.
"In fact, we've planted so many vineyards we have been producing more and more grapes most years since the 1990s."
Consumers were growing more discerning, too, said Mr Hope, who has run Hope Estate for 25 years, but now exports just 20 per cent of his volume, compared to 85pc in the 1990s.
Low cost competitors
Australia's "new world" wine appeal was frequently challenged by lower cost, but good quality, product from South America, California, New Zealand or South Africa.
While Australian winemakers had invested a lot of effort in a premiumisation drive, and more consumers were seeking out quality wine, they tended to generally drink less wine these days.
Rabobank's Mr Rannekleiv said fortunately for Australian exporters hunting for new market options, global wine stocks had tightened up in the past year after frosts and hail left one of the smallest European vintages in decades.
The US, the largest wine producer outside Europe, also suffered a "horrendous" drought-damaged 2020 harvest, and another below average result in 2021.
However, shipping container freight costs had jumped 200pc or more and sporadic shipping availability had caused a big jump in wine export costs into many markets.
Brent crude oil prices increased 70pc in the past year and natural gas prices in Europe were up 550pc in the same period, impacting the whole supply chain from fertiliser and farm machinery, to transport and glass bottle production costs.
"Most wine is sold in glass bottles, which is an energy-intensive process - and fuel represents up to 20pc of glass production costs in the US and 30pc to 40pc in Europe," Mr Rannekleiv said.
"Packaging costs, of which glass is the largest component, account for 12pc to 35pc of a winery's cost of goods sold."
Meanwhile, the vast majority of the wine industry's supply chain carbon emissions came from production and transportation of bottles.
He said re-thinking packaging options had to be on the agenda.
Glass producers were exploring production systems less reliant on fossil fuels and Californian wineries were looking at reusable bottles and collection systems.
The argument for lower priced brands shifting to bag-in-a-box or tetra pak containers was increasingly compelling.
Mr Rannekleiv said wineries had already responded to their soaring input costs by raising their prices.
But with energy prices set to keep rising in the wine supply chain and consumers also face additional costs for basic necessities, shopper spending power was unlikely to keep up with the increasing price of discretionary purchases such as alcohol.
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