The Demand for Wine in Australia Using a Systems Approach: Industry Implications

Abstract

The objective of this study is to explain the factors determining the demand for wine in Australia, based on a systems approach where wine demand is modelled as part of the broader demand for alcoholic drinks (beer, wine and spirits). Time series data on retail price indexes and apparent per capita consumption of alcoholic beverages for Australia for the period 1975/76 to 1998/99 are used for econometric estimation of an Almost Ideal Demand System. The results show that the demand for beer and wine is price inelastic and that both beer and wine are luxury goods. The study also found that current beer and wine consumption strongly follows past consumption patterns. Drink driving campaigns have not had a significant effect on alcoholic consumption, but there seems to have been a structural change in consumer preferences that has had a significant impact on the volume of wine consumption. Finally, there seems to have been an overall upward trend in wine consumption and a downward trend for beer consumption. The study re-confirms the importance of developing a model that considers the impacts of both economic and non-economic variables on wine consumption. Implications for wine industry marketing strategies are suggested.