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An Economic Analysis of Precision Viticulture, Fruit, and Pre-Release Wine Pricing Across Three Western Australian Cabernet Sauvignon Vineyards

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An Economic Analysis of Precision Viticulture, Fruit, and Pre-Release Wine Pricing Across Three Western Australian Cabernet Sauvignon Vineyards Department of Environment and Agriculture An Economic Analysis of Precision Viticulture, Fruit, and Pre-Release Wine Pricing across Three Western Australian Cabernet Sauvignon Vineyards Hayley Del Maynard This thesis is presented for the Degree of Doctor of Philosophy of Curtin University June 2015 1 Declaration To the best of my knowledge and belief this thesis contains no material previously published by any other person except where due acknowledgment has been made. This thesis contains no material which has been accepted for the award of any other degree or diploma in any university. Name ______________________________ Date_____________________________ 2 Acknowledgments I’m not sure “Acknowledgments” is an appropriate heading for this section; perhaps “Infinite Thanks and Gratitude” would be more apt. I don’t wish to acknowledge these people so much as shout my appreciation from the mountains and shower them with flowers and chocolates. But I suppose this brief page will have to suffice. There are so many people who have made this thesis possible, but first I would like to thank all of my wonderful supervisors for their insights, guidance, and assistance these past years. I am so lucky to have been under the leadership of Professor Mark Gibberd; you have made this thesis possible through your continual support and your belief in both me and my research. Dr Ayalsew Zerihun deserves a gold medal for his exceptional patience and thorough, constructive comments and advice; thank you for always demanding the best from me. I would like to thank Dr Amir Abadi Ghadim for the constant inspiration he has given me; your passion for economics and creative innovation was a driving force behind this research. And finally, I am especially grateful to Dr Tony Proffitt, a Precision Viticulture guru and all-around brilliant human being; there isn’t enough time in the day to list all the good things I have to say about this man. I would like to thank the Curtin University staff both at Margaret River and at Bentley. In particular I would like to recognize Mrs Michelle Dowding for her personal and professional assistance these past three and a half years; you, my friend, have made many a dark day bright. I would like to thank the Department of Agriculture and Environment and the Lagan Family Trust for the financial support I received and for financing this research. A special place in my heart is reserved for all the volunteer sensory analysis panellists. You donated many, many precious hours, and I am so incredibly grateful. I need to acknowledge the staff from the three sites that collaborated on this thesis. Thank you for trusting me and for sharing your time, energy, fruit, and wine with me. And to all my supportive family and friends, I give you all the gratitude and appreciation I possess. To Alex, this thesis is as much yours as it is mine. To my grandparents, our biweekly chats are the highlights of my week. And to my parents, without whom I most definitely would not be here, thank you. 3 Abstract In this thesis, the effects of Precision Viticulture (PV) technologies on intrinsic properties of Cabernet Sauvignon fruit and wine, quality, and price were spatially analysed through case studies and an overarching levelised cost model. Relationships between Plant Cell Density (PCD a vegetation index derived from near infrared:red reflectance that is often used as an input for PV technologies) and vine attributes (trunk circumference and canopy surface area measurements) were verified, before PCD imagery was used to delineate high and low vine vigour zones at three different vineyards in three climatically distinct wine regions of Western Australia (Geographe, Margaret River, and Great Southern). Wines were made from each zone, in addition to a uniform control (proportional blend of low and high vigour zones) over two vintages. Wine sensory and chemistry analyses were undertaken to examine the effects of vigour on specific organoleptic and volatile properties of the wines and how these effects translate to price and quality. A levelised cost model was created, incorporating the data collected from each of the case studies and using industry-derived cost values and response function observations from the existing literature in the field. Remotely sensed PCD and manually sampled vine measurements share a weak positive linear relationship. However, when vines are targeted based on high and low vigour zones (as opposed to grid sampling), the relationship strengthens significantly. These results verify the utility and economic efficiency of PCD imagery compared with on-the-ground data collection. However, when PCD was compared with berry chemistry values (pH, titratable acidity, and total soluble solids), consistently significant linear relationships were not found across sites. This result suggests that PCD imagery should be used as a tool to distinguish between vigour zones in a vineyard, however, under the conditions of this study it had limited use in the prediction of variation of berry composition. Management of variations in vine vigour using a zonal vineyard management approach has the potential to decrease operating expenses through targeted use of inputs and more efficient management practices and increase revenue through product differentiation or homogenization. PCD imagery, canopy surface area measurements, trunk circumference data, input from the viticulturist and winemaker, in additional to logistical issues were used to identify and define vigour zones and enabled differential management of low and high 4 vigour zones at each site. Two of the three sites realised increased total profit/ha through decreased operating expenses and increased fruit price. The only site not to achieve any benefits from PV was the smallest site (0.27 ha), suggesting that a minimum vineyard block size is required to realise a return on investment from PV. Small batch wines were demonstrated to be representative of their commercial scale counterparts. A semi-trained panel determined the overall quality of small batch experimental wines is of equal or greater quality than commercial scale wines through paired discrimination sensory analysis. This result supports and justifies further use of the small batch wines in sensory and chemistry analysis for studies of this nature. Site and regional meso-climate effects are the primary drivers of wine quality and price. However, vine vigour is also of significant importance. Quantitative descriptive analysis and targeted and untargeted gas chromatography mass spectrometry analysis (GC/MS) was undertaken to examine the effects of vintage, site, and vine vigour on each of the experimental wines. Balance, complexity, ethyl 2-methylpropanoate, and ethyl acetate were determined to be the main drivers of price. It was found that wines made from low vigour vines tended to be associated with red berry, dark fruit, jam, balance, complexity, and ethyl propanoate, whereas wines made from high vigour vines were grouped with canned vegetable, bitter, ethyl decanoate, 2&3-methylbutyl acetate, and 2&3- methylbutanol. Overall, a general inverse relationship was found between vine vigour and quality, suggesting that for Cabernet Sauvignon grown in the Western Australian wine regions used in this study low vigour vines produce wines of higher quality and high vigour vines produce wines of lower quality. Intrinsic quality of fruit and wine does exist and can be measured. This study has utilised a novel approach through the creation of a levelised cost model that includes total cost (operating, overheads, and capital)/tonne of fruit over the lifetime of the vineyard. Applying the first principles assumption that fruit price equals total cost/unit plus a profit margin (normally 20%), a unique dollar value assessment of quality was achieved. While this thesis does not attempt to further qualify the individual drivers of quality, the analysis verifies the existence of intrinsic quality attributes. 5 The ability of PV technologies to maximise economic return are subject to size, and recommended adoption rates vary with producer size. Using PV response functions developed from input from subject matter experts, findings of previous research, and data collected from case studies in this thesis, levelised cost/tonne was calculated for each step of PV adoption for each producer size. It was found that producers (with reference to overall producer size, not individual vineyard block size) of less than 15 ha are not encouraged to adopt PV technologies, whereas all other producers are encouraged to adopt all three technologies (remote sensing, soil sensing, yield monitoring). Spatial variability within a vineyard is an inherent issue faced by all growers. In this study, PV technologies enable targeted management to maximise economic return from a vineyard through vigour zone identification and ultimate quality manipulation (through product differentiation or homogenisation). Vine vigour shares an inverse relationship with quality: low vigour zones produce higher quality wines than do high vigour zones. Verification of this relationship enables the development of response functions which determine the overall economic potential of PV technologies. Furthermore, by assigning a dollar value to quality, it is possible to directly analyse the economic effects of PV technologies on vineyard profitability. As the wine industry currently lacks a universally acknowledged measurement scale for quality, the levelised cost analysis used in this research
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