Your Vineyard
Your Voice
The Newsletter of Wine Grape Growers Australia
January 2014
Reflection on supply and demand
imbalance - or is it misalignment?
The elephant in the room in respect
to supply and demand is, well, the
elephant.
It’s the vast quantities of C, D and
E grade wine which are the most
consumed in the marketplace – and the
most produced.
The Expert Review commissioned by
the Winemakers' Federation of Australia
(WFA) expert review characterises C, D
and E wine to be mainly D and E grade
by volume.
But to any observer of the
industry over the past 15 years,
today’s D and E had the right to
be called C and D grade wine
some years ago. This was based
on quality but it is now mainly
called D and E and based on
price.
to fit into this small space and much of it
ended up in the C and D segment.
Moreover, with the perfect storm of the
GFC, the high dollar and a declining
demand for Australian wine in the posthoneymoon period after its initial surge
into overseas markets, an increasing
proportion of C and D became D and E.
Secondly, in the import sector, the
strong Australian dollar assisted the
influx of imports.
Of course, the dollar worked in
combination with New Zealand
Sauvignon Blanc product excellence and
supporting marketing. Nevertheless, the
outcome was the same – a continued
bulge of C and D, and eventually E, on
the domestic market.
The result varied by stakeholder but
growers didn’t win.
The scorecard looks like this:
The precedents to this shift came from
events in two separate segments of the
market – both with the same effect on
the quality/price dynamic.
• Consumers win (lower prices). Firstly, on the domestic scene, a sizeable
proportion of the supply growth over the
past 15 years has been cooler-temperate
fruit aspiring to the lucrative A and B
segment of the market. Unfortunately, A
and B accounts for less than 10 per cent
of the market and the swelling volume of
aspirant newcomer wine was never going
• Winemakers win and lose (win
cheap fruit to maintain processing
throughput, lose markets and
margins).
• Retailers win (lower prices, greater
access to distressed industry assets).
• Growers lose (lower prices,
evaporated margins).
Improving quality is frequently cited as
Chief
the means to recapture competitiveness
and margin. Such ideas miss the point
there is no short-term problem with
quality.
It is better than ever and ‘value’ (quality
for price) is over the top. Oversupply is
driven by A and B aspirant fruit – that’s
good gear – it’s just that it’s being called
something else. Consider this – at the
beginning of the journey of the past 15
years sultana was a meaningful proportion
of the crush but virtually no sultana is in
the mix today.
National oversupply, or under-demand,
is and has been acknowledged for a
long time by WGGA. The Expert Review
confirmed what we knew – C, D and E is
oversupplied.
So the question about what is being
done to improve the market prospects of
C, D and E has to be asked.
WFA’s proposed actions from the
Expert Review included a massive boost
to funding the industry’s marketer –
Wine Australia Corporation (WAC).
The unquestioned support for WAC’s
programs seems misaligned with where
the problem is. The mid- to lower-grades
are most of the consumption base and
it’s the gear that is oversupplied.
The market prospects of this fruit need
to be improved. WAC is the designated
agent for improving the market
prospects of the Australian wine category
as a whole, not just the top end.
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Telephone (08) 8133 4400
Fax (08) 8133 4466
Email info@wgga.com.au
Website
www.wgga.com.au
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WGGA News
WGGA’s Wine Tax
Policy is open for
discussion
Since wine taxes are by definition, taxes
on wine, WGGA has in the past deferred
to the Winemakers' Federation of
Australia (WFA) Wine Tax Policy for its
policy settings.
However, the fact that the value of
winegrapes is derived from the value of
wine, means in a volatile tax environment
such as the present, growers are
increasingly exposed to wine tax risks
and a more active stance was required.
In the light of this, WGGA devised its
own Wine Tax Policy in June 2013.
Initially, the policy was approved by the
WGGA Executive Committee for feeding
into WFA Expert Review consultations.
The Review is now complete however
and nothing came out of this process to
alter WGGA’s position. Hence, the policy
is open for discussion.
The policy deals with both the Wine
Equalisation Tax (WET) and the WET
Rebate.
In summary, WGGA:
• Considers increases in wine taxation
cannot be justified on public health
grounds.
• Does not support a change to a
volumetric based tax.
• Supports WET Rebate reform to
ensure it is received by intended
recipients as currently defined by the
Australian Tax Office.
2013 WGGA AGM well attended,
well informed
With few resources to get out and about,
WGGA takes the opportunity to interface
with as many of the industry as it can at its
Annual General Meeting and to provide
them with a meaningful experience by
attending. By these measures, the 2013
WGGA AGM was a success.
Attendance was high with around 42 at
the event including 20 members (eight
are required for a quorum), and they
came from more than a dozen winegrape
growing regions around Australia –
ranging from WA to the Alpine Valleys
and Riverina to the Limestone Coast.
It was pleasing to have two GWRDC
Board members Phil Laffer and Jan
O’Connor and the Executive Director,
Stuart Thomson, in attendance together
with Wine Australia personnel in Board
member Brian Walsh and the Chief
Operating Officer, Steve Weinert.
Unfortunately, with commitments in
Sydney that day, WFA management
tendered apologies.
Guest appearances were instrumental in
the information component of the day.
The GWRDC Report updated the state of
the RD&E agenda for the past year and
set the scene for the merger of GWRDC
and Wine Australia Corporation in the
middle of this year. Greg Fraser, Executive
Director of Plant Health Australia,
handed-over the freshly prepared
Viticulture Industry Biosecurity Plan (IBP).
This occurred in combination with the
GWRDC, the funding agency, and was
received by WGGA as the wine sector’s
signatory to the Emergency Plant Pest
Response Deed.
The event also provided the opportunity
to introduce WGGA’s new appointment,
the National Winegrape Biosecurity
Program Coordinator Rachel Barratt.
A strong point of interest at the event
was a presentation by Shane Tremble
- Head of Corporate Development for
Woolworths Liquor Group, who provided
valuable insights into the current wine
market (see a summary in this issue of
United Grower).
There was no doubt left in anyone’s mind
that retailers are major players in the
market who are here to stay and there
was much to be gained in learning their
insights into wine consumption trends in
Australia. Pleasingly, closer cooperation
on this score was offered by Shane.
All in all, there was a sense of growing
interest in WGGA’s activities and
achievements and recognition that the
organisation’s achievements are starting
to mount up.
This tone of the meeting was rewarding
for the WGGA staff, who all work so
hard to serve the interests of Australia’s
winegrape growers. We look forward to
building further on this in 2014.
Lawrie Stanford, Executive Director
• Is cautious about more fundamental
reform to reduce claimed market
distortions.
• Commits to working with the WFA
and the Commonwealth Government
to ensure the WET Rebate is paid
to Australian Tax Office intended
recipients, being winegrape and wine
producers who convert grapes they
own to wine.
Further information can be found on
our website at www.wgga.com.au or by
calling Lawrie Stanford at the WGGA
office on (08) 8133 4400.
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WGGA News
Woolworths delivers straight talk on
consumer trends
A frank, funny and very open
presentation by Shane Tremble, Head of
Corporate Development for Woolworths
Liquor Group (WLG) was a highlight of
WGGA’s 2013 AGM.
In his talk, Mr Tremble stressed the
relationship between grape supply and
WLG’s consumer insights from its sales
data.
He speculated that the wine industry
would be in better shape if it adopted a
more holistic approach to supply chain
management, delivering wines customers
want to drink.
Mr Tremble noted that Woolworths sells
more Australian wine than any other
company in the world, which gives it a
massive stake in the industry’s success –
even though it deals with less than 1 per
cent of Australia’s growers directly.
While direct grower relationships were
few, WLG had nevertheless tripled the
number of growers it was involved in and
was sourcing from ten extra regions of
Australia.
On the topic of consumption trends
Australians are drinking 30 per cent less
alcohol than in the 1980s. Australian
wine consumption had been declining
for at least the past four years. with all of
the recent decline being in the sub-$8
category. The greatest growth has been
in the $16 - $25 (per bottle) category.
There has been a strong growth in
imports, particularly from Spain and
South America, not to mention the NZ
Bottled Table Red Wine shoppers constantly look for the “New & Exciting” as
100% Volume growth delivered through Product Churn
Total Australia Retail Bottled Table Red Wine Sales (Volume L)
2.8%
84.4m
94.2m
21.7m
-4.6m
-7.2m
4180
SKUs
2354
SKUs
1826
SKUs
2015
SKUs
4369
SKUs
2009
EXISTING SKUs
DELETED SKUs
INNOVATION | NPD
2013
SOURCE: AZTEC MAT 03/08/09 & MAT 03/08/13
“Savalanche”.
Interestingly Tremble showed there has
been growth in bottle red wine which
has all come from new products. While
1800 products have disappeared from
the market, growth came from 2000 new
products on the shelves.
Growth in Aussie whites has been
polarised to either ends of the market
– indicating the influence of the NZ
“Savalanche” in the middle.
There has been a revival of top end
Chardonnay, and (contrary to reds)
big growth in the sub-$8 segment as
consumers transfer from bag-in-box to
bottle.
In final comments, Tremble explained
there is an increasing fragmentation of
the market as consumers search for new
and different tastes.
In response to this, the ‘great challenge’
for the wine industry, due to the fixed
nature of the industry’s agricultural
investments and long production lead
times, was to respond rapidly to changes
in consumer taste and preferences.
Shane Tremble’s presentation is available
on the WGGA website (www.wgga.com.au)
Mixed bag of results for a WGGA audit of
winegrape supply contracts
A review of winegrape supply contracts
used in the wine sector was recently
conducted by WGGA to determine how
well they comply with the Australian
Wine Industry Code of Conduct,
and hence the general standard of
contracting in the industry.
The report card provided ‘mixed results’.
In a positive sense, the contracts
generally complied with the majority
of the core requirements of the
Code: specification of price, terms of
payment, identification of parties to the
agreement, description of the grapes to
be purchased and duration of contract.
It was found that 29 of 32 provisions
specified in the Code were met by at
least 75 per cent of the contracts.
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On the other hand, there was only one
contract which fully complied with the
Code, although five stated they were
covered by the Code.
While the audit was not a rigorous review
of Code compliance, being based on 20
contracts some of which pre-dated the
Code, the review pointed to some key
issues growers need to consider when
contracting.
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WGGA News
Some of the concerns from the audit
were:
• 50 per cent of contracts did not
include a dispute resolution clause.
• Very few contracts stipulated penalties
for late payment.
• There was a lack of basic protection
clauses such as a force majeure clause.
• Some did not have an explicit expiry
date.
• Some had no mechanism for
terminating a contract early in a nofault situation.
• Some were them hard to read and
understand including many with
complex clauses relating to the
all-important determination and
notification of pricing.
• Contracts with one-sided price-setting
mechanisms.
• Vague quality standards used in the
final determination of price.
• The ability for decisions to be made
by the purchaser at their “sole
discretion”.
• Errors and poorly worded clauses.
Some of the problems could potentially
be just as damaging to the winery as to
the grower in a dispute and this points to
the value of wineries signing the Code as
the most convenient, industry-sponsored
means of improving contracting
standards.
Noting the concerns raised in this audit,
growers are encouraged to seek legal
advice on any contracts they are offered.
The full report can be viewed on WGGA’s
website (www.wgga.com.au) along with
other guidance on how to negotiate
contracts that protect grower interests.
Grapegrowers from across Australia
join forces to tackle biosecurity
Remembering Kym
Ludvigsen
November 14, 2013 marked a significant
step forward in developing a united and
concerted effort to tackle biosecurity
threats facing the grape industry.
Wine Grape Growers Australia wishes to
acknowledge and celebrate the life of
Kym Ludvigsen, who died in a tragic farm
accident on Tuesday 3 December 2013.
Grapegrowers, horticultural experts
and industry leaders came together in
Adelaide to discuss the challenges facing
grapegrowers in preventing, preparing
for and responding to any biosecurity
outbreaks.
An outbreak could potentially cost the
industry millions of dollars, damage
producer livelihoods and others along the
value chain, jeopardise trade (domestic
and international) and potentially wipe
out regional economies.
Increasingly government and industry are
sharing responsibility for implementing
the biosecurity system including the
covering of funding and decision making.
Participants at the workshop in
November agreed that an ongoing Wine
Grape Biosecurity Industry Reference
Group (WBIRG) was needed to assist in
developing and overseeing biosecurity
for the industry and provide practical,
grassroots perspectives on biosecurity
matters to the WGGA and WFA executive
committees and the National Viticulture
Biosecurity Committee.
Prue Henschke from Henschke Wines
said: “Biosecurity management and
prevention is everyone’s business. As
growers we need to be aware of our
responsibilities and actions to prevent
any outbreaks as well as ensuring that
our industry needs are well covered
in any future arrangements. The new
Biosecurity Industry Reference Group is a
great opportunity to have these two way
conversations”
Kym will be sorely missed – his largerthan-life personality will leave a hole in
many people’s lives and WGGA and the
industry in general will be poorer for the
loss of his generous services.
Kym had been a committed member of
the WGGA Executive Committee since
early 2012. There is an extended tribute
on Page 6 of this issue of Grapegrower &
Winemaker.
We remember him with affection.
The new Biosecurity Industry Reference
Group will meet again in early 2014 to
map out industry priorities for biosecurity
management over the next few years and
discuss how to better collaborate with
other viticulture industries.
At a glance…
National Winegrape Grower Book
2013-14
• NEW - WGGA launches the National
Winegrape Grower Book in 2014
– a compilation of ABS grower
information useful for “mapping”
growers by type, location, production
capacity and production. Free with
current WGGA membership.
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Membership
• Reminder – 2013-14 Membership.
With record membership it is the
perfect time to join and help make the
grower’s voice stronger.
SA grapegrower
• If you are a SA grapegrower paying
the SA Industry Fund levy it makes you
a WGGA member. Privacy laws restrict
us from knowing your contact details
so contact us to register and receive
YOUR membership benefits.
e-Alert
• Interested in national industry events
and opportunities for growers? Join
our e-Alert mailing list today.
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