''It's no different to grocery or anything else that we are in,'' Mr Luscombe said.

''Consumer electronics, general merchandising, this is a trend that is happening worldwide, in fact it's very much behind the world trend in Australia, so there is a lot more of it to come.''

The message will chill Australian winemakers, already suffering dwindling profits because of the wine glut, and now facing a fresh challenge from supermarkets hooked on the better margins that flow from private-label products.

And the Woolworths chief, whose company pulled in group liquor sales of $3.1 billion for the first half of 2009-10, said winemakers should have known the grape glut would help spur growth in private-label wines, adding it was not wise to blame shopkeepers for the competitive squeeze.

''Don't point the finger at the retailer, you need to search your own backyard to understand why you made the decisions with the knowledge that you should have had.''

Woolworths does not release penetration rates for its private-label products but Mr Luscombe told BusinessDay that home-brand wine was its biggest growth area in liquor.

While private-label brands account for an estimated 20 per cent of annual sales of Woolworths and rival Coles, rates in Britain and the United States are twice as high.

Woolworths has introduced a number of labels to compete with established wine companies on the shelves of its shops and Dan Murphy's outlets, with labels such as Craftsmen, Cow Bombie and Baily & Baily not only attracting customers but also winning awards.

The wine oversupply, believed to be a local surplus of 20 million-40 million cases a year, has forced many wineries to dump their wine to generate quick cash, while others are ripping out vines or going bust.

''The big issue for the wine industry is significant overproduction,'' Mr Luscombe said, adding that there had been some ''not terribly prudent investment'' by smaller players.