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Australian Wine and Liquor Industry::

OVERVIEW

Australian wine was the global success story of the 1980’s and 1990’s and helped to create and build a worldwide consumer market for wine, particularly in the UK, the USA and Canada. At this time, Australia has about 2,300 wine companies and the sector employs around 31,000 people. There are about 172,676 hectares under vine. Australia is the world’s sixth largest wine producer (after France, Italy, Spain, the US and Argentina) and the fourth largest exporter; wine is fourth on the list of Australian farm exports after beef, wheat, wool and dairy.

 

Being such a large country with almost every climate and soil type, Australia is one of the few wine producers to make every one of the major wine styles, from full-bodied reds and deep, fruity whites through to sparkling, dessert and fortified styles. Prized Australian bottlings grace the menus of many of the world’s leading restaurants, while popular varietal and blended wines compete on the shelves of wine shops and supermarkets in over 80 countries around the world.

 

TRENDS

 

The fortunes of the wine industry have changed rapidly over recent years, largely in line with wine grape production levels. The industry has gone from a wine grape glut, to a situation of under-supply and then back to a grape glut following the 2009 crop. This over-supply is expected to exert downward pressure on both wine and wine grape prices. The situation is exacerbated by reduced global demand for wine as a result of lower discretionary spending due to the financial crisis. Domestically, the industry faces the challenge of selling a highly discretionary product in difficult conditions of lower consumer confidence and rising unemployment.

 

Industry trends include:

 

  • Retailer dominance extending to direct sourcing and importation

 

  • Reduction of alcohol content to counter the impact of rising taxes

 

  • Sustainability emerging as a key consideration in production and marketing

 

  • The reversal of “premiumisation” to counter reduced business due to global economic woes and unemployment

 

 

KEY FORECASTS

 

Australian wine exports to China are expected to reach a value of $200 million this year, as more Chinese drinkers adopt Western-style drinking habits. China’s biggest brewery, Tsingtao, is putting its substantial weight behind the Australian wine industry by deciding to exclusively import Australian wine throughout its vast distribution network across China.

 

A forecast glut of wine grapes in South Australia is to slash farmers' profits. This comes as fears grow that the crop will be the last under a generous water entitlement regime. Despite calls from the industry to rip out 20% of the nation's vines, South Australian grape growers are on track to produce an 110,000 ton surplus of fruit next year, according to the state's Phylloxera and Grape Industry Board.

 

Grape growers are gearing up to dramatically increase production next harvest, despite the sector's debilitating problems of over-supply. The annual 2010 South Australian Wine Grape Utilisation and Pricing Survey estimates the state's grape growers will increase production by 150,000-830,000 tons next harvest. SA Wine Industry Association chief executive Brian Smedley said the wine industry probably wasn't reacting quickly enough to the over-supply problem.

 

INDUSTRY DEVELOPMENTS

 

Australia's high labor costs and first-world safety regulations, distinctive geology, and the importance placed on mining research by successive governments and businesses has meant that the Australian mining sector is quite technologically advanced. A large proportion of mines worldwide make use of Australian-developed computer software, such as Enterprise resource planning software by Mincom Limited and geology/mine planning software by Runge Ltd and Maptek Pty Ltd. Australia's mining services, equipment, and technology exports are over $2 billion annually.

 

MARKET SIZE

 

Australia’s key industry figures for the wine market (2009) are as follows:

 

Key Industry Figures

2009

Industry Revenue 

6,686.5 $ million 

Revenue Growth 

-2.5 % 

Industry Gross Product 

1,615.1 $ million 

Number of Establishments

1,346 Units

Number of Enterprises

1,003 Units

Employment

14,526 Units

Exports

2,486.9 $ million

Imports

459.4 $ million

Total Wages

906.6 $ million

 

KEY PLAYERS

 

Constellation Australia Limited         

Foster's Group Limited          

Casella Wines Pty Limited    

Australian Vintage Limited   

Premium Wine Brands Pty Ltd

 

 

GROWTH FIGURES AND FDI FIGURES

 

The latest figures available indicate that the Australian alcoholic drinks market generated total revenues of $25.5billion in 2008, representing a compound annual growth rate (CAGR) of 3.3% for the period spanning 2004-2008.  Foreign investment rules are liberal and encourage inward investment. The country has well-defined regulatory bodies and a well-established legal system that can be described as investor friendly.  There are no specific figures available detailing FDI for the Australian wine grapes and wine, but these figures are included in the broader category of Agriculture.

 

Stock of Foreign Direct Investment in Australia by Industry:

 

Industry

$ million

% share of total

 

Agriculture, forestry and fishing

 

700

 

0.2

 

Mining

 

99,659

 

25.4

 

Manufacturing

 

73,848

 

18.8

 

Electricity, gas and water

 

16,105

 

4.1

 

Construction

 

13,037

 

3.3

 

Wholesale and retail trade

 

57,093

 

14.5

 

Accommodation, cafes and restaurants  

 

914

 

0.2

 

Transport and communication

 

25,929

 

6.6

 

Finance and insurance

 

53,143

 

13.5

 

Property and business services

 

33,830

 

8.6

 

Other services

 

6,105

 

1.6

 

Unallocated

 

12,500

 

3.2

 

Total

 

392,862

 

100

 

 

RECENT DEALS

 

The Agreement Between Australia and the European Community on Trade in Wine, signed in Brussels on 1 December 2008, is a formal international agreement that regulates the trade in wine between Australia and the European Community. The Agreement came into force on 1 September 2010 and replaced the 1994 Agreement between Australia and the European Community on Trade in Wine. There are significant advantages to Australian producers and exporters in this agreement because all Australian winemaking techniques will now be accepted. There are much simpler requirements covering everything from labeling requirements and blending rules to alcohol levels and the display of Australian awards. In short, Australian wine producers will have to make fewer changes and concessions to sell their wine in the EC.

 

NEWS


A hefty tax could be in the offing for Australia’s miners and other natural resource companies. Although it’s not official yet, it has many pondering what the impact would be for related exchange traded funds (ETFs) as well as one of the world’s largest mining sectors. Canberra’s plan for a tax of up to 40% on profits generated by resource companies would cut deeply into earnings and dividends. Not only would this put future projects at risk, but the mining sector at large would suffer. The tax, which could come down as early as 2012, would threaten the competitive side of Australia’s mining sector.

 

The mining industry’s anger over the proposed 40% resource 'super profits' tax (RSPT) on all commodities mined in Australia was a major contributing factor to the shock ousting of Australian Prime Minister Kevin Rudd in June 2010. 

 

INVESTMENT OPPORTUNITIES

 

Though the financial stability of the industry is currently in question, future investment opportunities would most probably involve Australian wine exports to China, India and SE Asia.

 

RESOURCES: INDUSTRY GROUPS AND ORGANIZATIONS

 

The Australian Wine and Brandy Corporation (AWBC) is a national body working to support the wine industry, http://www.awbc.com.au

 

Wine Grape Growers Australia (WGGA) is the national industry body for grape growers, http://www.wgga.com.au 

 

The Winemakers’ Federation of Australia (WFA) is the peak national industry body for winemakers, http://www.wfa.org.au

 

 

Current Investment Opportunities in Australia:

 

For current investment opportunities in Australia, please click here  :   http://investinaustralia.com/current-opportunities

 

 

 

 

REFERENCES

  1. Unknown, "Australian industry overview," Australian Wine and Brandy Corporation, 2010,

 http://www.wineaustralia.com/australia/Default.aspx?tabid=235.

  1. Unknown, "About Australia: The Australian Wine Industry," Australian Government Department of Foreign Affairs and Trade, April 2008, http://www.dfat.gov.au/facts/wine.html.
  2. Editors, "Wine Manufacturing in Australia: Australian Industry Report," IbisWorld, June 2010, http://www.wineaustralia.com/USA/LinkClick.aspx?fileticket=0uzw2QA33DQ=&tabid=3833.
  3. Editors, “Chinese beer giant backs Aussie wine”, Daily Wine News, September 2010, http://www.winebiz.com.au.
  4. Editors, “Grape glut to slash profits”, Daily Wine News, May 2010, http://www.winebiz.com.au.
  5. Editors, “Growers ignoring wine grape glut”, Daily Wine News, May 2010, http://www.winebiz.com.au.
  6. Unknown, “Wine Export Approval Report”, Wine Australia, June 2010, http://www.winebiz.com.au.http://www.wineaustralia.com/australia/LinkClick.aspx?...winefacts%2F_FREE%2FExports%2FWebwearJun10.
  7. Editors, “Wine Manufacturing in Australia: Australian Industry Report”, July 2010, http://www.ibisworld.com.au/industry/default.aspx?indid=117.
  8. Editors, “Food, Beverages and Tobacco in Australia: A Complete Industry Guide”, August 2010, http://www.researchandmarkets.com/research/1d6b84/food_beverages_a.
  9. Unknown, "Trade Agreements," Wine Australia, 2010, http://www.wineaustralia.com/australia/Default.aspx?tabid=279.
  10. Unknown, "Australian wine sector: media briefing," Wine Australia, 2008, http://www.wineaustralia.com/USA/LinkClick.aspx?fileticket=0uzw2QA33DQ%3D&tabid=3833.