Disequilibrium in the Australian wine industry: A product diversity approach

Stocks of Australian wine, at an industry level, have considerably exceeded sales for many years. However, all varieties and regions are not the culprits of this oversupply. The mismatching of supply and demand can be attributed to a lack of adequate market information, particularly at the export level. Sub-optimal levels of product diversity in international markets can act as a barrier to entry for new wine exporters, despite that market remaining a promising prospect from a purely volume perspective. This paper focuses on product diversity. An empirical model for studying the US wine market is proposed and the implications of the analysis are explored.