This year’s wine grape harvest in Australia has fallen by 30 per cent – the equivalent of 400 million litres – easing the wine glut but signalling the end of the cut-throat discounting of the past two years.

British drinkers of Australian wine are likely to face price rises after drought, frost, bush-fires and ill-timed rain have produced the smallest national vintage since 2000. The next vintage is also expected to be below average because of carry-over damage to vines and the prospect of restrictions on irrigation in southeastern Australia, which produces the vast bulk of the grape crop.

Constellation Brands, the world’s biggest wine producer, has given warning of a hit to profits from the worst drought in memory. The owner of Australia’s Hardys and Houghton labels has downgraded its earnings forecasts to 28 per cent below consensus estimates.

Richard Dodd, a spokesman for the British Retail Consortium, believes that the days of “Buy one, get one free” promotions may be numbered.

He said: “It is likely to mean that the price of Australian wine in the UK goes up, but there are limits to how far it goes up. Of course, it’s a fiercely competitive sector, with heavy discounting and promotions.

There are a whole range of countries that consumers can buy their wine from.”

Although the era of promotions such as six bottles of Jacob’s Creek wine for just £20 at Asda may end, David Berry Green, a buyer for Berry Bros & Rudd, the UK wine merchant, believes that companies may find they have limited scope to raise prices in Britain. It has been the biggest market for Australian wine for some time.

The grim harvest comes after a glut of grapes in the past few years that drove down high street prices and comes amid a resurgence in interest in French wines and stiffening competition from Argentina, Chile and the United States.

While Australia led off-trade sales in the UK at the end of last year, with 23.9 per cent of market share – worth about £1 billion – sales of French wines in the UK rose 0.9 per cent in value during the past year to £765.8 million for a market share of 18 per cent.

Mr Berry Green said: “The overall picture for Australian wine [growers] is good. Prices will go up, but the big boys will buy it in from anywhere.

“For the people we work with, prices will harden. Competition is such that they have to be wary of that. [But] as far as the big boys [supermarkets] go, there’s a tonne of stock there. They don’t think they’ll break even in terms of supply and demand until 2010. I wouldn’t have thought there will be a huge difference in price.”

Adrian Hoffmann, who runs Dimchurch Vineyards in the Barossa Valley wine region, said that companies are searching for grapes to crush, process as wine, fill bottles and honour orders to meet demand.

“Bottled wine prices are set to go up and you’ll see the end of the two-buck chuck, but the fact is you are still seeing 2004, 2005 and 2006 wine hitting the market,” he said.

Heady days

Australia is the leading exporter to the UK by volume, having surpassed France in 2003

— Australian wine accounts for 21.2 per cent of the UK market by volume and 23.9 per cent by value. The UK is Australia’s single biggest market for wine

— In the year to June 2006, Australia exported 269,264,860 litres to the UK, a 2.6 per cent increase on the previous year

— Per capita consumption in the UK rose from 12.6 litres in 1994 to 21.1 litres in 2004

Source: Australian Wine and Brandy Corp

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