Just an article I was reading about McGuigan shares going down due to a grape glut here.
They are predicting vine pulls, and some producers aren't bothering to even pick grapes.
Its not really suprising when you consider how cheap wine is in Australia these days.
McGuigan drops $110m By Kevin Andrusiak April 09, 2005 From:
MCGUIGAN Simeon shares dived more than 19 per cent yesterday as Australia's No.2 locally owned winemaker became the first victim of the glut of red wine grapes gripping the industry. Investors slashed $110 million off the company's value after McGuigan was forced to reveal a 10 per cent downgrade to full-year profit targets because of the over-supply of grapes and a rising Australian dollar.
McGuigan would not get last year's prices for the 10 per cent of its wine it sells on the spot market. As a result, it said full-year profits would now fall between $35 million and $40 million.
Share's in the winemaker, which produces the Bin wine range and half of the Jacob Creek range under contract for Orlando, fell 99c to $4.19. Advertisement:
Analysts and fellow producers were quick to point out that the downgrade was a company specific problem.
However, they cautioned there was an oversupply problem in the industry that was affecting prices and playing havoc with smaller producers.
McGuigan chairman David Clarke said the company would have to complete a series of deals to get rid of its bulk wine production, estimated at
20,000 tonnes, but getting similar prices to last year was not possible."We'll get rid of it, it's just a question of when and at what price," he said. "As long as you store it properly, wine won't go off all that quickly."
Company chief financial officer Mike Noack said the wine industry was at the crossroads, with some growers leaving grapes unpicked because of an oversupply.
"If things don't significantly improve in the next 24 months there is a strong chance you will see vine pulls," he said. "That last happened in the mid-1980s."
Last year's wine grape harvest produced about 1.9 million tonnes and ABARE expects about the same this year.
The Australian Wine and Brandy Corporation has predicts Australia's oversupply of some grapes will continue for another two years. It believes wine stocks would be running short from 2007.
Southcorp spokeswoman Michelle Lawlor said her company did not face the same bulk wine sales problem because it used a different business model.
"Certainly the industry has been affected by an oversupply," she said.
An industry analyst, who declined to be named, said McGuigan was in a different market to other major producers. "The downgrade today won't have much of an impact on other producers," the analyst said. "There wasn't much price movement from the other producers."
The stock price for Southcorp - the subject of a $3.1 billion takeover by rival Fosters - dropped 1c, while Xanadu shed 1c to 23c. Evans & Tate slumped 5c to 87c.
US-based Constellation Brands, which owns Australia's biggest producer Hardy's, among a host of other drinks products, yesterday said demand for Californian and Australian wines continued to increase in Europe.
The worldwide group hit $4billion in sales for the first time. It's Australian share price gained 9c to $7.01.