Background
The United States of America (US) wine market is the most attractive wine market in the world. Australian industries exporting to the US are about to be handed a once-in-a-generation opportunity, by way of what looks to be a continually declining Australian dollar. Experts have suggested that within the next two years, the Australian dollar could buy as little as 40 US cents. Despite an ocean of challenges facing global wine, the Australian industry must position itself to engage with the next decade of market activity, which looks to herald a changed economic and geopolitical landscape. Currently the Australian industry is not so prepared.
The British economist Stafford Beer said:
"According to the cybernetician the purpose of a system is what it does. This is a basic dictum. It stands for bald fact, which makes a better starting point in seeking understanding than the familiar attributions of good intention, prejudices about expectations, moral judgment or sheer ignorance of circumstances."
Beer coined the term POSIWID – "The Purpose Of a System Is What It Does". A system’s merits can be assessed by what it does, its actual behaviour, its real results – not what it claims to be or do.
To borrow from Beer, elaborated by Dan Davies in his book The Unaccountability Machine, people often find themselves trapped by system infrastructure or subsystems designed for a specific set of conditions. It results in an unconscious commitment to systems and status quo that stifles change, particularly when change is necessary. The world is full of well-intentioned people failing in ways that reflect poor systems rather than malice. Hence the widespread frustration with bureaucracy – followed by a lack of change.
Executive summary
This paper will argue that:
- Though Australia’s weak dollar presents market opportunity in the US, recent and projected performance of the Australian wine market in the US suggests dramatic systems failure and that serious reform is necessary. It will argue that the Australian system is overcentralized, accommodating a single point of failure that has been unable to adapt to changing market conditions, and that decentralization is necessary by way of regional assumption of responsibility.
- The Australian industry at large needs to better understand the US market system, and that the strategies and systems for market entry need to match the complexity of the target market.
The intention of this paper is to start a conversation rather than to resolve one. It is hoped that the industry’s brightest and best will step forward and ensure meaningful reform.
Part 1: Market overview
State of Australian wine in the US market
The Australian wine export market to the US is in a state of turmoil. In the year ended September 2024 Australian wine exports to the US declined 7 per cent in value to $341 million and 16 per cent in volume to 113 million litres, the lowest volume shipped to the market in over two decades. While the commercial wine market appears to be in global decline, most exported Australian wine, both globally and in the US, is commercial. Paradoxically, Australia’s foothold in the growing US premium wine market is shrinking. Given Australia’s domestic oversupply and the general commoditised nature of the Australian economy, export markets, particularly the US, have never been more important for Australia.
The US market is a golden opportunity for a weak Australian dollar
The following statistics indicate a US market brimming with opportunity for a weak Australian dollar. In 2023 the US wine market was valued at between $70 and $80 billion. In 2022 the US was estimated to have imported approximately $7 billion of wine. Some sources suggest it may grow at a compounding annual growth rate of 4 percent from 2024 to 2030. In 2021 the US imported wine from 74 different countries. Some sources suggest that there are over 1000 wine distributors operating across the US wine market. Despite what appears to be a gradually forming picture of a slowing market, consolidation and downsizing, all impacted by cost-of-living pressures disrupting trends and changing consumer behaviour, the US market remains the world’s largest and most attractive wine economy. While the world hold its breath awaiting the implementation and impact of President Trump’s tariffs, the business world seems bullish. However, Australia’s footprint within the US market is shrinking.
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