State of the Sector report

Uniquely Australian: Fresh Authentic Exciting

January 2018 Contents

Introduction 3 History, evolution, revolution 4 Reasons to believe 13 Markets – performance and outlook 26 Domestic Australian market 27 (mainland) 28 China (Hong Kong) 29 of America 30 31 32 (excluding UK) 33 (excluding China) 34

All export figures are for calendar year 2017 unless stated otherwise. Values are in Australian dollars free on board (FOB) unless otherwise stated. Introduction

Australia produces unique that are This report looks at the parallel and Hiroshi Ishida, ’s leading fresh, authentic and exciting. shared history of and music in said ‘There is no other wine- offers distinguished sites, the wealth of Australia, and how both have evolved producing country like Australia, which some of the oldest vines on the planet into something uniquely Australian, is afraid of changes. Australia and multi-generational families whose appreciated by millions of people is the most dynamic and diverse wine long-standing dedication provides around the globe. The wine sector has producing country.’ inspiration and leadership while offering been through a particularly turbulent custodial care of Australia’s most decade since 2007, but our commitment precious vines and wines. to innovation and quality, diversity, creativity and authenticity means we There are distinct parallels between are primed for a new era of prosperity. and Australian music. The latest market performances for Australian music and wine are unique Australia suggest that we are well expressions of a diverse Australian on the way. culture and landscape. Both are distinctly Australian while also universal. Like wine, Australia has a rich musical history that has played a huge part in shaping Australian culture. Music and ‘So, look into the song are inseparable in Indigenous cultures and part of unbroken traditions land and it will tell dating back tens of thousands of years. , like grapevines, has existed in Australia since our colonial days. you a story’ Rock and popular music have an almost Great Southern Land, Icehouse limitless number of genres — including alternative, country, electronic, funk, , indie, , pop, , punk, R&B, rock, ska, and soul — just as there are more than 100 varieties grown commercially. These multiple genres and varieties provide a niche for every taste and every type of music and wine lover.

Wine Australia • State of the Sector • January 2018 3 History , evolution, revolution

History of innovation Musical exploration and innovation in Australia can be traced back to the goldfields, where improvisation was a significant part of music in the colonies. In the early 20th century, (the pianist and composer) emerged as Australia’s first world renowned musical innovator. In his long career, he made many adaptations of other composers’ works but much of his work was experimental and quite unusual. Perhaps his best-known music experiment was ‘Free Music’ from the 1930s that challenged conformity with the traditional rules of set scales, rhythms and harmonic procedures. Grainger believed his Australian origin naturally led to innovation and experiment in his music.

This innovation continues today with Australian interpreting old classics and creating new classics. Two examples illustrate this. On the back of a ground-breaking video, ’s Somebody That I Used to Know became a global hit in 2011. The song samples Luiz Bonfá’s 1967 song Seville and has sold more than 13 million copies worldwide, becoming one of the best-selling digital singles of all time. In the classical arena, Australian violinist, conductor and composer, has established an international reputation for his compelling performances and artistic individualism. He was made a National Living Treasure in 1999. Percy Grainger

4 State of the Sector • January 2018 • Maurice O’Shea tasting wine at the Mt Pleasant

‘I think I hear the sounds of then’ Sounds of Then, GANGgajang

Innovation and exploration have also The desire to embrace the funky and always been at the forefront of the gritty art of has led to Australian wine and grape community. wines that are truly exciting and Australian growers and winemakers capture a revolution in the glass. are curious and willing to experiment; One of the reasons for the success we challenge convention. Whether it’s of Australian wine is that, as a innovative techniques in the , collaborative community, it has pushing winemaking boundaries or innovated. Over the last 50 years the experimentation with non-traditional emergence of an Australian fine wine varieties, there is a trend to throw dimension owes a lot to individuals and out old rules and step forward with institutions who have experimented, a generational shift in attitude and tried new things, and come up with approach. For example, Maurice O’Shea novel solutions for problems. These hunted for the best vineyards and innovations haven’t just benefited wines in the Valley and across Australian wine, they’ve spread Australia for his stunning expressions throughout the wine world. of style or place. pushed boundaries in winemaking, taking Innovation has helped the latest in winemaking research to wine scene develop into the dynamic create Australia’s most famous wine — and diverse state it is in today. Penfold’s Grange.

Wine Australia • State of the Sector • January 2018 5 Emergence of the The post-war influx of European immigrants and returning soldiers culture into Australia, also brought with them new skills in wine production. As new The influx of immigrants at the end of techniques were introduced and the Second World War had a profound developed, and as gained impact on Australian music. The unique a taste for the newer, finer wines, the sounds of Australian rock, pop, folk, and table wine culture emerged in the reflect the arrival of people from 1960s. Until then, sweet and fortified all around the globe, particularly from wines dominated the Australian wine Europe in the 1950s and 60s. However, landscape. the most influential event occurred in 1964 when the biggest band in pop While the renaissance of table wines history arrived on our shores for its occurred in the 1960s, the quality of only visit, causing scenes of fan frenzy Australian table wines was recognised that have never been repeated in in the 19th century. During a blind Australia. The huge crowds that turned taste at the 1873 Vienna Exhibition, out to welcome (300,000 in French judges praised some wines ) signalled a new dawn for our from ; however, they withdrew culture. their laudatory remarks when they discovered that the wines were There was an explosion of new bands Australian and not French. The judges in the wake of The Beatles such as The protested on the grounds that ‘wines of Missing Links, , the Masters that quality must clearly be French.’ Apprentices, and the . were the most Australian wines may have garnered successful and influential act of the some insulting remarks at the Vienna era. The band had a string of local hits Exhibition, but the sector continued to including She’s So Fine, I’ll Make You win wine awards and receive global Happy, Wedding Ring and Sorry before praise. In 1878, a Shiraz from Victoria moving to England and releasing the competing in the Exhibition was worldwide hit in likened to the French Chateau Margaux late 1966. and was described as a ‘trinity of perfection.’ One Australian wine won a gold medal at the 1882 International Exhibition and another received a gold medal at the 1889 Paris International Exhibition.

‘I drank the wine they had left on my table’ Would, The

The Easybeats

6 State of the Sector • January 2018 • Wine Australia The boom In the 1970s, Australian music found its own voice, moving beyond English and American influences and creating a uniquely Australian sound. Skyhooks’ landmark debut Living in the ‘Now listen, 70s, released by in 1974, became the highest selling oh we’re Australian album in history to that point. This influential album proved to Australians that it was possible to be steppin’ out’ both alternative and popular and that it Eagle Rock, Daddy Cool was OK to sing about local places and Living in the 70s by The Skyhooks experiences. Such was its impact that tracks from the album were banned Uniquely big and bold can also describe In the 1970s, red wine consumption on commercial radio in Australia. Australian wines in the 1970s. The table overtook in Australia and the As punk music emerged in the mid-70s, wine continued fruit-forward styles that emerged began The Saints and flew the to expand, led by a boom in red wine to capture international attention. The flag of a more rebellious, do-it-yourself sales, particularly bold and flavoursome end of this decade brought a preference rock attitude. September 1976 marked red blends such / for dry table wines and the emergence a watershed moment in Australian Shiraz. Sales of Australian red wine in of . . The Saints, at the time the domestic market increased from Wine regions expanded and were re- an unknown band from the suburbs of 10 million litres in 1964–65 to 36 million planted, while others were established , released their self-produced litres in 1974–75, an annual average by new generation pioneers in debut single (I’m) Stranded. Amazingly, increase of 14 per cent per annum , , the record earned rave reviews in over the decade. In 1959, 69 tonnes District, Orange, Mudgee, Margaret England, and was dubbed the ‘single of of Cabernet Sauvignon were crushed River and more. A generation of this and every week’ in the UK’s Sounds in Australia — by 1979 the crush had Australian winemakers experimented magazine. With its central theme of grown to 25,000 tonnes. Over the same with new winemaking processes and alienation, it became an anthem for a period, the Shiraz crush grew from sophisticated blending techniques. generation of young people at a time 18,200 tonnes to 72,000 tonnes. when Australia shared its with Britain. But arguably more influential than the song itself was the Figure 1: Red wine sales in Australia (million litres) – 1955–1975 Saints’ fierce independence. There 40 were no venues to play in Brisbane, so the band hired out suburban halls. No 35 local record company was interested in what they were doing, so they hired 30 out a local studio, paid for the recording themselves and put out the song on 25 their own label, Fatal Records. Today, 20 this same attitude can be observed in

Australia’s young winemakers. 15 The 1970s also saw Australia give birth 10 to something uniquely big and bold in music — Aussie , where 5 AC/DC, The Angels, , and , among others, created a 0 new hybrid of -oriented 1971–72 in the nation’s pubs and clubs that 1955–561956–571957–581958–591959–601960–611961–621962–631963–641964–651965–661966–671967–681968–691969–701970–71 1972–731973–741974–75 influenced musicians here and overseas Source: Australian Bureau of Statistics for generations.

Wine Australia • State of the Sector • January 2018 7 Sunshine in a bottle – The evolution of Australian wine continued in the 1980s with a swing Figure 2: Chardonnay tonnes Chardonnay boom to led by the rich and - crushed – 1979 v 1989 driven Chardonnay styles. Everything Australian music really flourished in 28000 was big in the 80s — expense accounts, the 1980s. The , Hunters and shoulder pads and Chardonnay. With Collectors, Paul Kelly, The Birthday generous oak exposure, Chardonnays Party, , , the of the era were deep yellow, with Church, and butter on the palate and toffee on led the way. the nose. The popularity of Australian Some bands, like AC/DC, Men at Chardonnay with consumers led to Work, INXS, and , achieved an explosion in plantings — during international success. AC/DC’s Back the decade the Chardonnay crush In Black released in 1980 is the second increased from 1,000 tonnes to biggest-selling album of all time after 28,000 tonnes. ’s Thriller. The growth in white wines, especially ’s album Business As Usual Chardonnay, was driven by a was a massive global hit in 1982. In continuing change in social attitudes the USA, it spent an unprecedented to table wine consumption as well as 15 weeks at number 1 on the USA the rapid rise of the soft-packs (or 1000 , led by the ubiquitous casks). Soft-packs broadened the single, Down Under. It was arguably consumption base in Australia as the musical equivalent of . or spirits drinkers became wine drinkers. 1979 1989

The global success of Midnight Oil’s Australian wine was also finding Source: Australian Bureau of Statistics and Dust in 1987 is remarkable. success overseas, particularly in the UK. It is a about the wines replaced generic terms struggles of and like claret and hock. While big brand Australia broke new ground by reaching environmental issues. In 1989, Rolling names dominated, a boutique winery out to consumers to actively help Stone magazine ranked it No.13 on their culture also emerged. Australian wines them understand what was in the list of the 100 best of the 1980s. became established in the traditional bottle — varietally led, and with taste markets of Europe. The world was descriptors on back labels. Australia embracing clean and fresh wine readily understandable and wines with fruit-driven white styles and ‘accessible’, by changing the language robust reds. of wine of the time.

‘Something shimmering and white’ , The Church

Diesel and Dust by Midnight Oil

8 State of the Sector • January 2018 • Wine Australia ‘Do you remember, Period of extraordinary export growth nothing stopped us in A wave of Australian musicians emerged in the 1990s who changed Australia’s , in our day’ musical landscape and looked towards Australian culture for inspiration. Acts , Cold Chisel such as , , , , Tumbleweed, Clouds, , , Custard This could describe Australia’s 2007, the Australian wine sector more and The Cruel Sea took alternative winemakers — they are free to than tripled production from less than music to the local masses aided by the produce unique and artisan wines 400 million litres to 1.2 billion litres and success of local music festivals such that express the wine’s as well it achieved total revenues of $5 billion as the . as their own creativity. in 2007. The value of exports grew from $212 million to $3 billion. Australia stood out from many other The 1990s showed the world that countries in the 1990s as many bands Australia was adept at blockbuster, The sector built an enviable global created new sounds by blending full-flavoured, densely packed, powerful reputation for producing quality wine different styles of music. In 1991,Treaty , red wines. Robert Parker Jr, the famous and created strong export markets ’s song of reconciliation, USA-based critic, with praise and particularly in the UK, USA and became the first track recorded by high scores for the wines of this style, Canada. Australia had conquered the predominantly Indigenous performers bolstered the image and supported mainstream consumer market through to make the charts. The song was Australian winemakers into reinforcing showcasing world-class wines that sung almost entirely in the Aboriginal this and related styles. Intense, expressed the vast diversity of talented language Gumatj. It was a true concentrated examples of Shiraz, winemakers and their unique regional collaboration, written by Paul Kelly, and red blends dominated aspects. Australian wines were marked Yothu Yindi and Midnight Oil’s Peter the Australian fine wine story. for their elegance and longevity and Garrett. The dance-oriented Filthy established a reputation for winemaking Global demand for Australian wine Lucre remix peaked at number 11 on the excellence that cannot be duplicated created a boom in new Australian charts, spending 22 weeks in anywhere in the world. the charts. plantings in the late 1990s. Australian exports grew at extraordinary rates However, a storm was coming over is arguably the best through to a peak in 2007. From 1991 to the horizon. example of an Australian band of the era, blurring genres to produce unique music. Formed in Brisbane in 1993, Regurgitator is one of the most original Figure 3: Australian exports – 1991 to 2007 (A$ billion FOB) bands Australia has ever produced and it defies categorisation. National 3.5 broadcaster has described Regurgitator as a ‘machine that 3.0 absorbs popular music in all its dizzying permutations, then spews it back out. 2.5 This technicolour approach means that Regurgitator are free to play whatever they want — as long as it’s delivered 2.0 with a nod and a wink.’ 1.5

1.0

0.5

0.0 1992 1994 1996 1998 2000 2002 2004 2006

Source: Wine Australia Regurgitator

Wine Australia • State of the Sector • January 2018 9 The perfect storm The dawn of the new millenium saw the emergence of two things that had a profound impact on Australia’s talented musical artists — the advent of reality television and the demise of live music venues.

The advent of reality television in the Midnight Oil performing live 2000s affected the ability of young and upcoming independent acts to gain a recording contract and airplay. The first of the music reality programs, Popstars Live, aired in Australia on ‘We can lock away the 8 February 2000 and forever changed the musical landscape in Australia. Thousands of young musicians/singers bad memories together, from all over Australia competed for a record contract through stages of close to the elimination. The first series of Popstars was one of the year’s highest rating TV programs, at its peak attracting an past forever’ audience of over 2.5 million viewers. Alone With You, The Sunnyboys The pop group Bardot, created from the Popstars television program, achieved a number one hit single, two additional However, a combination of government As a result, live music venues began gold singles and a number one album regulation, insatiable industry a steady decline. For example, there in Australia. Popstars was the precursor profiteering and disregard for the value has been a 40 per cent decrease in of other global reality music programs of music started to strangle Australia’s revenue from live performance venues such as the , The Voice, live music industry, leaving a vibrant in the CBD lockout areas, X Factor and Australia’s Got Talent. and diverse culture gasping for breath. according to data by music body APRA At the same time as reality TV was Musicians found themselves victims ACMOS. The figures, collected from taking over our television screens, there of a financial squeeze caused by the 1 February 2013 to 31 January 2015, was a steady decline in live music progressive impact of regulations show a decline in ticket sales, spending venues in Australia, once the lifeblood imposed on venues. Stricter - on live music and attendance at dance of Australian musicians. Until the 2000s, driving laws combined with the home venues with a recorded music licence. hundreds of local artists were playing entertainment boom saw patron This is not a uniquely Australian in venues across the country, driving numbers slump. Already desperate phenomenon: it’s happening worldwide. a booming local industry and birthing to counter this decline, venues were Australian icons like AC/DC, INXS and instead smashed when increased Midnight Oil. residential development brought a new issue: noise complaints. Inundated by angry residents seeking quieter nights, councils succumbed to lobbying and introduced noise restrictions on inner-city venues. Owners were confronted with a financial dilemma: soundproof their businesses at an astronomical cost, restrict live music, or shut their doors.

10 State of the Sector • January 2018 • Wine Australia Figure 4: Australian exports – 2007 to 2013 (A$ billion FOB)

3.5

3.0

As the Australian wine sector reached its peak in sales volume (and, in recent 2.5 history, profitability) a ‘perfect storm’ began. From 2007, forces combined to hit the sector, which saw profitability fundamentally lowered for many 2.0 participants over the next six years. The factors included: • The global financial crisis (GFC) that hit world markets starting in August 1.5 2007 and accelerated through 2008 2007 2008 2009 2010 2011 2012 2013 — coinciding with a significant fall Source: Wine Australia in Australian wine exports. Export volumes recovered through 2009, only to fall again in 2010 and 2011. The ‘storm’ intensified due to the From 2007 to 2013, export volumes fell • Fall in demand for Australian wine in oversupply of wines that resulted by 100 million litres from 786 million to key markets, especially the USA, UK from excess planting and winemaking 686 million litres and value declined by and Canada, from 2007 to 2012. capacity given the unexpected fall $1.2 billion from $3 billion to $1.8 billion. • From 2004, the in export demand and rise in the Exports to the USA were hardest hit over rose steadily from 80 US cents to Australian dollar. This created a series of this period. From a peak of $960 million almost parity in July 2008. A sharp responses with negative implications. A in 2007, Australian exports to the USA fell fall to 62 US cents in August 2008 market for uneconomic and wine to $360 million in 2013. preceded a steady climb to parity developed ensuring supply was slow in November 2010. to respond to the fall in demand and Domestic retail consolidation, supplier profitability. This put further price and management and vertical integration volume pressure on wine producers and accelerated through the period. educated the market to expect lower Woolworths accelerated its growth of priced wine, damaging the Australian Dan Murphy’s and acquired Langton’s wine brand and the demand for exports. in 2009 and Cellarmasters in 2011. As a result: Wesfarmers acquired Coles in 2007 and • Retailers were able to source cheap began to transform its management, wine to support their private label and strategy and performance — including promotional strategies. its business. • There was a flood of cheap Australian wine onto export markets, much of it The situation was not helped by in bulk or packaged without proper low domestic demand growth and branding support. increasing imports. • Winemakers accessed cheap fruit to maintain or increase wine production to amortise fixed costs — this provided a market for uneconomic grapes, and put further price and volume pressure on winemakers. • There was an increased focus by some participants on ‘leveraging’ the Wine Equalisation Tax rebate.

Wine Australia • State of the Sector • January 2018 11 ‘Time for a cool change, I know that it’s time

Emerging from the storm for a cool change’ Cool Change, On the musical front, the last decade has seen the biggest changes in Australian music, not just in the broadening styles and their popularity Figure 5: Australian exports – 2013 to 2017 (A$ billion FOB) but in the way music is recorded, listened to and distributed. Digital 3.0 downloading and music streaming have fundamentally changed the way people listen to and access music. Jon Rose, acclaimed improvising violinist and instrument maker, explains the impact from his perspective, ‘Even an 2.5 obscure artist like myself can find a dozen websites my material can be downloaded from for free, or for a few dollars. I don’t have the time or the resources to go chasing after these 2.0 people — it’s how it is. We accept, we adapt, or we try to get a real job’.

While the technology has changed, Australians continue to produce amazing music. We’ve had international acclaim 1.5 for acts across many genres, including 2013 2014 2015 2016 2017 , , , Tame Source: Wine Australia, 12 months ended September 2017 Impala, DMA’s, , , , and , to name a few. The Australian wine sector has also A new generation of experimental Over the last decade, Australian seen significant change. We once led winemakers began to emerge, with hip-hop found its voice through the world but ‘the perfect storm’ saw artisan production and organic/ , The Herd, Bliss n Eso, the Australian grape and wine biodynamic credentials being explored. , Maidza, 360 and, community retreat into defend or Today, there’s a particularly strong most significantly, A.B. Original. survival mode. However, it was during focus on freshness, natural acidity, and Both members of A.B. Original are these tough times that a counter regional distinction. Australian wine has Indigenous Australians. Their music culture began to arise. Conversations never been more exciting, diverse or is overtly political and has been shifted to Australia’s often-overlooked focused on improving its own culture. described as ‘angry, polemical, cool wine regions. Whole bunch brutally frank and meant to inspire fermentation, lower alcohol, earlier This focus is resonating around the a response, good or bad’. picking, brighter red wines styles world. Since falling to a low in 2013, and a knack for seeking out the best Australian exports have steadily grown. from old vines, unique sites, unsung In 2017, the value of Australian wine regions and a mesh of new, interesting exports grew by 15 per cent to grape varieties outside of the noble $2.56 billion and volume increased varieties emerged. by 8 per cent to 811 million litres. The average value of exports grew by 7 per cent to $3.16 per litre FOB, the highest since the equivalent period in 2009.

A.B. Original

12 State of the Sector • January 2018 • Wine Australia Reasons to believe

Despite the challenges faced by the There can be no doubting our music industry through the digital age credentials: and the decline in live music venues, • Australia is home to talented Australian music has never been more artisanal winemakers attuned to diverse or exciting with many artists their vines and place and skilled from a wide range of genres finding in their craft. success locally and internationally. • Australia is home to distinctive From the commercial pop of to the , exceptional vineyards, blissed-out of Tame talented winemakers, expressive Impala, Australian musicians today wines and a new generation are continuing to build on the past improving and carrying on the while remaining authentically and legacy of their predecessors. uniquely Australian. • Australia’s food and wine offering is The Australian grape and wine world class. Research undertaken by community has endured a tough period Tourism Australia shows that people but has emerged stronger than ever, who have visited Australia rank us ready for a new, sustained period of as number two in the world for our prosperity. With grapegrowers and food and wine experiences, behind winemakers focused on wines that are and ahead of Italy (third). an authentic representation of their place, the Australian dollar expected to remain relatively low and perceptions of Australian wine improving (among trade and consumers), it’s time for the world to embrace Australia’s unique and exceptional premium wines.

‘There’s no time like the right time, and that’s now’ The Right Time, Hoodoo Gurus

Wine Australia • State of the Sector • January 2018 13 ‘Playing in the dirt, we find the seeds of fun’ Kiss The Dirt, INXS

Diverse and authentic are often the unsung heroes of the Australian music industry. They are the Australians who make the world sing while staying behind the scenes. There’s a rich history of Australians who’ve made their fortunes being the person putting words into a singer’s mouth. Often songwriters are happy to let those stars take the glory, happy to stay out of the limelight. They love to make music and find the right voice to lift their song to the next level. The songwriters may not be household names but their songs are.

One example is , who Coonawarra soil dominated the scene of the early 1970s either writing or producing Australia has some of the oldest grape The evolution of Australian wine can hits for , , , vines in the world, dating back to the be seen through the abundance of Mud and Smokie with musical partner 1840s. Australia was one of only two varieties available and a wide spectrum . He later produced countries in the world whose vines were of different wine styles from the classic classic albums for Blondie, The Knack, not destroyed by in the to the contemporary. Australian Crawl and , as nineteenth century. In the right grower’s Australia has distinctive terroirs and our well as hits for , hands, old vines give concentration winemakers embrace their differences and in the 1980s. His list of of flavour, depth and complexity. to produce unique styles and varieties. hits is extraordinary, including Mickey Linked to lower yields, old vines give a (1982), Love Is A Battlefield (1983), Can profound expression of the place where While production is dominated by the the Can (1973), (1973), they are grown. likes of Chardonnay, Shiraz, Cabernet Living Next Door to Alice (1976), Lay Your Sauvignon, Grenache and Semillon, We now grow more than 100 different Love on Me (1979) and The Best (1989). there’s been a recent surge of interest grape varieties in 65 wine regions Yet Chapman is not in the Australian in ‘alternative’ varieties that are often across the country. Australia has Recording Industry Hall of Fame. well suited to Australia’s climate; these some of the most diverse for include varieties like , Nero d’Avola The songwriters of the Australian wine grape growing in the world. These and Grüner Veltliner. sector are the growers whose grapes include ultra-cool to moderate-cold underpin Australia’s rock star wines. regions, high elevations, warm climate The imagination of Australian Australian wines express the diversity subtropical regions, coastal and inland winemakers and curiosity of Australian of the people who craft them and the wine-growing regions. grapegrowers means that many unique regional characteristics of their Southern Mediterranean varieties have Australia has some of the oldest and origins. Australia’s climate, unspoilt land been very successful and plantings of most varied soil profiles on Earth, from and ancient geology is truly unique emerging varieties are increasing. rich and fertile through to rugged and and as a result produces an incredibly desert-like, with high mineral content diverse range of wine. Australia’s wine regions are scattered and arid areas. with multi-generational families whose long-standing dedication provides Combine the world’s best inspiration, leadership and custodial and teaching with a diverse care of some of the country’s most landscape and it’s no surprise that precious vines and wines. Australians craft wines that are truly an expression of place.

14 State of the Sector • January 2018 • Wine Australia The Australian grape and wine while winery productivity and wine community is open to new and old quality have continued to improve. ideas. Our winemakers ‘push the We lead the world in innovation. envelope’. They are innovative, The vast majority of carefully tended defying stereotypes and challenging vineyards and nurtured fine wines in the norms from varietal composition this country are the consequence of a and winemaking techniques through huge investment in capital and human to packaging. commitment to knowledge and its Australian winemaking techniques application in eliciting the very finest have adapted over time and are expressions of the noble grape varieties Creative continually evolving. from the unique Australian terroirs to which they are naturally suited. Australian musicians are among the Australia is an innovative wine country most creative in the world, taking unafraid to make adjustments to To quote esteemed influences from around the world and enhance quality and make great wine journalist Makiko Morita, ‘In Australia, producing something unique. A perfect that people enjoy drinking. Australian producers with different backgrounds example of this is , the wines are emerging with a strong focus are aiming for “wines that only I can debut album from . on freshness, natural acidity, balance make” without being restrained by Released in 2000, the album contains and regional distinction. traditions or law, nor concerned about over 900 individual samples, from competition or Mr Parker’s reviews. Australia is recognised as a world long-forgotten R&B records to This is such a pleasure, almost like leader in many aspects of grape and instructionals to ’s ‘Holiday’. borderless music. There’s the punk that wine production driven by a significant But what really makes this album destroys stereotype, the rock full of and sustained investment in research brilliant is not so much the number or rebellion, the exciting pop and rather and innovation. Our research funding quality of the samples used as the way sexy funk. There is also the classic that is different to other approaches used that they’re employed. The Avalanches interprets the tradition freely, as well as around the world. The Australian wine have managed to build a totally unique hip-hop that takes anything fun.’ context for all these sounds, while still sector combines their resources into allowing each to retain its own distinct a collective R&D investment pool, flavour. As a result,Since I Left You which is matched dollar for dollar sounds like nothing else in the world, by the . This past or present. It was critically and collective and cooperative investment commercially successful, peaking in the in innovation is one of the reasons top 30 on the Australian Albums Chart, Australia is now established as a number 12 in Norway, number 8 on the leading wine producing nation. We UK Album Charts and, in the USA, at have internationally recognised grape number 10 on the Top Electronic Albums and wine research organisations and chart and in the top 40 on the Top researchers, including the Australian Heatseekers chart. Wine Research Institute (AWRI), the Commonwealth Science and Industrial Like Since I Left You, wine is also greater Research Organisation (CSIRO) and than the sum of its parts. There’s the South Australian Research and nothing like Australian wine because Development Institute (SARDI), and there’s nothing like the people and the a strong focus on innovation. Our Since I Left You by The Avalanches places of Australia. There’s freedom, commitment to R&D has seen our creativity and a desire for excellence in vineyards become more drought- the Australian wine community. tolerant and pest and disease resistant

‘There’s a warmth in the eyes and a clearness of thought’ The Deepest Sighs, The Frankest Shadows, Gang of Youths

Wine Australia • State of the Sector • January 2018 15 ‘Time was right because you told it to, Award winning I really like you’ While musicians don’t make music Lock It, Falling Joys to receive accolades, international awards do highlight the global reach of Australian artists and they can help generate more airplay and sales, World Wine Sommelier Wine Awards 2017 especially in the USA. Awards 2017 The Sommelier Wine Awards (SWA) is In 2012, Gotye became the second The Decanter World Wine Awards is the only competition aimed solely at Australian artist ever to win the the world’s largest and one of the most the UK on-trade. Grammy for Record of the Year for influential wine competitions. In 2017, Somebody That I Used to Know — the While Australian wine has been clearly more than 17,000 wines were judged number one in the UK off-trade for first being Olivia Newton-John in and awards given. 1974 for I Honestly Love You. In 2006, 15 years, Australia trails France and won the Grammy for best The world’s biggest three producers Italy in the on-trade. Hence the SWA is performance while in 2017, — France, Italy and Spain — walked an important platform to help boost the Flume won the Grammy for best dance/ away with the most awards. However, Australian category in the UK on-trade electronic album. In 2017, Sia picked up Australia outperformed all three plus market. The results of the 2017 SWA have two nominations in the Best Pop Duo/ competitors from Chile, Argentina, the just been released. Group Performance category for Cheap USA and South Africa in the share of The following medals are awarded: Thrills, as well as Best Pop Vocal Album gold and above awards. • Gold for her seventh studio album, This Is Of the 981 awards Australian wines Acting. Staying on the dance scene, a • Silver received, 6.7 per cent were gold and remix of local Ry X’s Only by • Bronze above (see Figure 6). In comparison, USA producer Kaskade and ’s • Commended. of the 3,781 awards France received, Lipless scored a nomination in the Best 3.6 per cent were gold and above. Italy Remixed Recording category in 2017. In the 2017 SWA awards, France, Italy received 2,802 awards, 2.7 per cent and Spain received the most SWA Winemakers also don’t make wine to of which were gold and above. medals, no doubt due in part to the receive awards, however the results fact that they produce far more wine By variety for Australia, the most gold of two recent international wine than other countries and entered more and above awards were achieved by: competitions — the Decanter World wines in the competition. However, • Shiraz (18) Wine Awards 2017 and the Sommelier like the Decanter Awards, Australia Wine Awards 2017 — highlight the • Chardonnay (12) outperformed all key competitors in its growing positivity about Australian • Cabernet Sauvignon (11) share of gold medals (see Figure 7). wine around the world. • (4) Of the 172 medals Australia received, 18 per cent were gold medals, placing Australia ahead of France (17.4 per cent), Italy (16.4 per cent) and South Africa (15.8 per cent).

Fifteen wines received Food Match medals of which Australian wines won three, behind only Italy with five.

Shiraz achieved the most golds for Australia with eight, ahead of Chardonnay with five and Cabernet Sauvignon with three.

16 State of the Sector • January 2018 • Wine Australia Figure 6: Share of gold and above awards at the Decanter World Wine Awards 2017

6.7%

5.9%

4.2% 4.0% 3.9% 3.6% 3.5%

2.7%

Australia Argentina Chile Spain South France USAItaly Africa

Figure 7: Share of gold medals at the Sommelier Wine Awards 2017

18.0% 17.4%

16.4% 15.8%

14.6%

12.0% 11.5% 10.8%

Australia FranceItaly South Spain ChileUSA Argentina Africa

Wine Australia • State of the Sector • January 2018 17 Influential As with anything unusual and exciting, Australian music has influenced musicians around the world looking for a different angle for their own music. From Grainger through to The Avalanches and beyond, Australian music has continued to assert itself into the world music scene.

The great Norwegian composer Edvard Grieg once wrote of Percy Grainger: ‘Even among the very greatest pianists, The Go-Betweens I do not know one that I could compare with him. He has actually realised my 30 greatest Australian songs. The song Australian ingenuity in winemaking has, ideals of pianism.’ In the 1950s, Johnny was also selected by NME writers in and continues, to influence the world O’Keefe earned global acceptance their ‘100 Best Indie Singles Ever’ in 1992. of wine. Grange is arguably for the Australian version of rock ‘n’ Australia’s most famous wine and the band, , formed roll, his influence spawning the Iggy story of its creation by legendary in 1980, were pioneers, creating a Pop cover of Real Wild Child (Wild winemaker Max Schubert with the genre that changed the global One). In the 1960s, The Easybeats, in help of brilliant research chemist musical landscape forever in the contrast to some of their English and Ray Beckwith is a modern tale of early 1990s — grunge. The Scientists American contemporaries, provided imagination, a battle against the odds were much more influential than their positivity to the international music and redemption. minimal commercial success would scene, like colour TV in an age of black indicate. Their sound predated Max Schubert reminisced about the and white. AC/DC followed in their Nirvana by a decade. influence of Grange in a presentation to footsteps, becoming the most influential the first Australian National University Australian rock band ever. There is Australian musicians continue to Wine Symposium in Canberra in 1979. no end to the artists who quote AC/ influence the global music scene. For He said, ‘I would like to express the hope DC as an influence. , example, Perth’s , like that the production and acceptance frontwoman of the Divinyls, was a many Australian bands in history, is of Grange... as a great Australian wine powerhouse performer and paved producing music that is ahead of the have proved that we in Australia are the way for generations of female curve. Ingenuity and experimentation capable of producing wines equal to artists who followed. with different effects pedals has led to the best in the world. But we must not be its songwriter, producer and performer, While international commercial afraid to put into effect the strength of , creating new and unique success has eluded many Australian our own convictions, continue to use our sounds. This, combined with a strong artists, they have had a profound imagination in winemaking generally, sense of in his music, has made influence on musicians around the and be prepared to experiment in order Tame Impala one of the most influential globe. Influential groups of the 1980s, to gain something extra, different and musical acts working today. like The Go-Betweens, and unique in the world of wine.’ and the Bad Seeds, were less commercially successful but were critically lauded in the UK and the USA. , critic for the New ‘Change in mood, I York-based Village Voice, once wrote that Grant McLennan and Robert Foster of The Go-Betweens were the greatest can sense it, changing songwriting partnership working at the time. McLennan’s song, Cattle and everyday’, Cane, about growing up in , was named in the Australasian Change In Mood, Kids in the Kitchen Performing Rights Association’s top

18 State of the Sector • January 2018 • Wine Australia Australia has produced world class Perceptions are shifting in large parts Consumers are recognising this fact, wine for much of its post-European thanks to Australia leading with our best with the share of consumers believing history, but we haven’t always been wines. Now more than ever consumers this up 11 per cent in the last 7 years widely recognised on the global stage. regard Australia as one of the key to 83 per cent, while the lift among The huge success of a handful of countries for consideration when non-consumers increased at even major brands often obscured to the selecting an expensive or fine wine. greater rates (up 40 per cent). everyday consumer what the smaller Over the last seven years, the share of Our wines have always been viewed were doing. However, the global wine consumers viewing Australia as a as value for money, punching well consumer is beginning to discover that valid choice has climbed 16 per cent for above their weight for quality in any there is much more depth to Australian existing consumers, and again, the news price range. In 2010, three quarters of wine than they had perceived before. is getting through to non-consumers of Australia’s consumers viewed our wines Consumer research shows Australian Australian wine, with the share of non- as such. As of 2017, this had improved wine shines brightly as value for money regular consumers climbing a whopping a further to 83 per cent with a larger and our reputation as an expensive/fine 57 per cent. More encouragingly, the lift among non-consumers. Maintaining wine is on the rise. shift has been even more pronounced the perception of good value for in Australia’s traditional major markets Globally, perceptions of Australian money while our consumers move of UK and USA where Australia has wine have improved measurably. up the quality scale is reassuring for often been pigeon-holed only as ‘value Research from Wine Intelligence shows consumers and producers alike. for money’. that among existing consumers of Australian wine, quality perceptions Australian chefs, baristas and food have increased three per cent in producers have been playing a more the last five years. Furthermore, our prominent role in trends. consumers are converting their friends, Although Australia’s multicultural history as perception of quality among non- does not lend itself to a particular regular Australian wine consumers has style of food, the mixing of cultures climbed by an impressive per cent has also brought with it a fusion of over the same period. food from across the globe that can be perfectly matched with Australian wine.

Figure 8: Share of regular wine drinkers viewing Australia as an expensive/fine wine

90% 2010 201

80%

70%

60%

50%

40%

30%

20%

10%

0% China Canada UK Singapore USA Hong Kong Japan Quebec (excl. Quebec)

Source: Wine Intelligence

Wine Australia • State of the Sector • January 2018 19 ‘Going up and down and back again’ Up & Down & Back Again, Powderfinger

Australian wine production is on the rise while global wine supply has tightened, providing an opportunity for Australian wine to support the increasing global demand for premium wines.

World wine production in 2017 is expected to be 24.6 billion litres — 2 billion litres (8 per cent) below 2016 and the lowest since 1961, according to the recent announcement by the International Organisation of Vine and Wine (OIV). This equates to 222 million cases of wine not being available. To put this in perspective, Australia’s total production in 2016 was 1.3 billion litres or 144 million cases.

The OIV reports that there were falls in the three top producing countries Clarity Records, Adelaide — Italy, France and Spain — which recorded historic low harvests, while Chile had another small year compounding an existing short supply. Argentina recorded significant growth from a very low crop in 2016, but 2017 Resilient is still well below the long-term One of the great tragedies of the average. The USA’s is slightly digital age has been the demise of down on 2016. the independent record store, the last This drop in global production comes refuge of the music-obsessed freak. A at a time when consumption is on the real place run by real people where you rise after a period of decline following can peruse the racks and touch and see the Global Financial Crisis. The OIV an album and the artwork. Who doesn’t estimates that consumption will be love the smell of vinyl in the morning? between 24.1 and 24.6 billion litres in While record stores are an endangered 2017 — which will bring it equal to, or species they are not yet extinct. The above, production for the first time annual Record Store Day, first held in ever, putting pressure on existing global the USA in April 2008, is now a global stocks and prices. phenomenon and has helped record stores survive. There is a vinyl revival The lowest global harvest since 1961, — sales of vinyl increased for the sixth combined with the increase in global consecutive year in 2016 to reach a consumption, presents a window of 25-year high. This was also the first opportunity for Australia. This supply year that spending on vinyl outstripped pressure in the market may provide that spent on digital downloads. The a launching pad to establish new boost in vinyl sales is part of a wider products firmly in the market, which shift in the fortunes of the music may then have an advantage over industry back towards making a profit. products trying to re-enter.

20 State of the Sector • January 2018 • Wine Australia Figure 9: Australian wine stocks, production and sales over time

illion litres

2,500

2,000

1,500

1,000

otal inentory Wine rouction 500 otal sales

0 7 9 1 3 4 7–08 2010–1 2011–12 2012–1 2013–1 2016–17 2005–06 2006–0 200 2008–0 2009–10 2014–15 2015–16

In 2017, Australia had its largest The increase in the crush reflects the The main driver is lower supply. harvest for at least 10 years and moved excellent seasonal conditions in many This means that sellers are under ahead of Chile and Argentina to be the regions and will help meet the growing less pressure to discount, which 5th largest wine producer in the world. demand for Australian wine, both in increases the average price and Australia is well positioned to take export and domestic markets. reduces competition among advantage of the opportunity, suppliers. Compound this with lack of Australia can meet the growing with stocks at reasonably high levels availability, and suddenly buyers may demand for premium wine. The supply and well-established routes to market look more favourably at a different would most likely come from A/B/C in the four largest wine markets in the product to fill a gap on the shelf or quality grade grapes that are priced world: the UK, China, Germany and the the menu. For example, an Australian at >$600 per tonne and from a wide USA. All are significant net importers of Chardonnay may replace an Italian range of regions. Over the past decade, wine and rely heavily on Italy, France , if it fills a similar style and much of the independent grower and Spain. Higher inventory levels are price point specification. ‘The last tonnage from cool/temperate regions required to support growing sales. time we had an opportunity like this has been sold as commodity grapes Production growth has been matched was in 1986 after Chenobyl’, says (or bulk wine) for blending, well below by sales growth in the past three years. Jim Moularadellis, Austwine’s Chief its potential value, due to a lack of The Australian Government’s $50 million Enthusiasm Officer. ‘Australia was seen export demand at >$10/bottle. As Export and Regional Wine Support as clean-and-green, which opened the demand grows, this fruit would move Package will further enhance the door for us and led to sustained export into more profitable segments. sector’s ability to develop new export growth for many years.’ opportunities. However, the opportunities for Australia are not entirely predictable. It’s not Australia was the only major wine necessarily a matter of replacing producing country to record an above- French , Italian Pinot Gris or average harvest in 2017. In a continuing Chilean , with the same variety upward trend, the 2017 Australian from Australia — particularly at higher national crush is estimated to be price points. 1.98 million tonnes — an increase of 8 per cent from the 2016 .

Wine Australia • State of the Sector • January 2018 21 Figure 10: Average export price and average winegrape purchase price trends 1999–2017

Aerae eort Aerae rae rice 6 er litre er tonne 1000

900 5 800

700 4 600

3 500

400 2 300

200 1 100

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

inancial year Source: Wine Australia

The growth in streaming resulted The chart shows that winegrape prices in an overall 17.6 per cent increase have been on an upward trend since in the total digital market, with sales 2011. Prior to that, grape prices were on a now accounting for approximately downward trend from 1999. It also shows 70 per cent of the total market. that export prices and winegrape prices have tracked very closely over time. Innovation remains crucial to revenue growth. ARIA Chairman and Chairman All but two of the top ten varieties & CEO of Entertainment, showed increases in the national Sustainable , said of the improved average purchase price. Shiraz and performance, ‘This is a reflection of the had the greatest increases Australian Recording Industry Association industry’s innovative marketing and followed by Gordo Blanco, Pinot (ARIA) wholesale figures for 2016 indicate high level of artist development, as Gris/Grigio and Chardonnay. The two that music sales revenue in Australia is up well as the further consumer take up of exceptions were Cabernet Sauvignon and streaming is continuing to rise at a quality digital retail services. Although and , which saw prices fall by rapid pace. ARIA has noted a 5.5 per cent our industry is now on a pathway to 1 per cent or less. growth in revenue since 2015, generating recovery, it is absolutely critical that There was an increase in the proportion $352.2 million for the AustABralian music Australia retains a strong copyright of A and B grades purchased (i.e. $1500 industry, while streaming now accounts framework to ensure that artists and and above per tonne) from 6.4 per cent for 38.5 per cent of the overall market by labels can continue to invest, innovate to 7.4 per cent, which has contributed value, and grew by just over 90 per cent and protect their work and earn their to the overall increase in the national over the year. fair share in the growing digital market.’ average purchase price. This reflects Revenue is also on the rise for the the growing demand for premium Australian grape and wine community. Australian wines. The 2017 was the ‘We’re Shiraz was the biggest driver of the largest crop since 2006, but pricing overall increase in the average purchase firmed regardless, helped by favourable price as the share of Shiraz purchased gonna rise global supply and demand conditions. at A and B grades increased from The national average purchase 13.3 per cent in 2016 to 15.5 per cent price increased by 7 per cent to up ’ in 2017, which is double the proportion $565 per tonne, the highest since from 5 years ago. Randwick Bells, Paul Kelly 2008. It is the third consecutive vintage and the Coloured Girls where the average purchase price for winegrapes increased.

22 State of the Sector • January 2018 • Wine Australia Globally competitive The evolution of music consumption has developed fairly quickly over the last few decades. From the first portable music system such as the cassette-playing Sony Walkman in the late 1970s, to the first iPod of the early 2000s, consumers went from purchasing cassettes, to CDs, to paying for individual MP3s.

Fast forward to 2017, and we have today’s streaming services, which ‘It’s a wide open road, allow consumers to play music without downloading individual files. In an era when music has become so accessible and now you can go and easy to download, the average music fan’s preferred listening method to any place, that you is nevertheless streaming. Streaming eliminates one of the hassles with data storage, offers personalisation, and want to go’ allows the convenience of seamlessly Wide Open Road, The Triffids changing between artists and genres.

While streaming presents challenges to artist revenues, streaming of music Market access has also been a critical South Korea also means Australian musical acts can issue for the Australian wine sector. gain access to more listeners across the Since the beginning of 2015, a trifecta Under the Korea–Australia Free Trade world than ever before. Platforms like of free trade agreements (FTAs) with Agreement, the tariff applying to Bandcamp also mean that artists can Japan, South Korea and China has Australian wine sold in South Korea has by-pass traditional forms of distribution improved market access and helped been reduced to zero. and go directly to the consumer. increase the competitiveness of Australian wine exporters. Japan The Japan-Australia Economic China Partnership Agreement (JAEPA) The China–Australia Free Trade immediately eliminated the tariff on Agreement (ChAFTA) will see tariffs bulk wine, while the 15 per cent tariff on Australian wine exports gradually on bottled and will be reduce to zero by 2019, allowing eliminated over 7 years, reducing to zero Australia to be more competitive in the by 2022. JAEPA will help to lift Australia’s growing Chinese wine market. ChAFTA competitiveness and put Australia back will help put Australia on the same on a level playing field with Chile, which footing as Chile and entered into an economic partnership and provide a significant competitive with Japan in 2007 that saw a gradual advantage over France, Italy, the USA, removal of tariffs on its wine. Chile is Argentina and South Africa, which each currently the second largest importer face a 14 per cent tariff on bottled wine of wine to Japan but imports declined and 20 per cent on bulk wine. by 6 per cent in value in 2016–17, while Australia grew by 6 per cent over the same timeframe.

Wine Australia • State of the Sector • January 2018 23 Affirmative Research conducted by the ’s Women, Work and Leadership Research Group suggests that, despite the huge success of artists like Sia and , Australian women still earn less than males in the music industry, and currently they face gender inequality in two key ways. One is who ‘makes it’ as a performing artist — the other is who ‘makes the decisions’ that affect the industry.

‘Whether it be radio playlists, festival line-ups, industry awards or major Today, young independent female industry boards, male artists and voices artists such as , Tash Sultana, overwhelmingly dominate the Australian Jess Locke and Alex Leahy are finding music industry’, says the report’s lead ‘Yours is the local and international success. author, Associate Professor Rae Cooper. Perhaps no one embodies this changing The report also found that female artists landscape more than Melbourne singer- future, don’t receive significantly fewer industry songwriter Courtney Barnett. To quote awards than their male peers, and they Cloher, ‘...[a] quite incredible thing run away’ are still underrepresented on triple j’s started to happen. Something I had Hottest 100. The ARIA Hall of Fame also never seen before. An Australian woman Shout and Deliver, has only 11 female artists among its became famous around the world for 75 inductees. her songwriting. Not her dance moves, or extensive wardrobe, but for writing However, the situation is changing great songs.’ Barnett’s debut album, with a new wave of female singer- Sometimes I Sit and Think, was met with songwriters emerging in the wake of rave critical acclaim, with numerous the enormous success of ’ publications listing it as one of the best Sound Of White in 2004. Women such albums of 2015, including , as , , , , , Liz Stringer, Adalita, Abbe May, Sia and the Tribune. At the end Furler, Jess , , of 2015, Barnett was nominated for a and many more started Grammy Award in the Best New Artist the wave a decade ago that has now category. She was later nominated for become a ‘tsumani’, according to Jen Best International Female in 2016 in the Cloher. .

According to Cloher, ‘There has never been a better time to be a woman in independent music.’

24 State of the Sector • January 2018 • Wine Australia Australian Women in Wine Awards in

In September, Wine Australia co- Six years ago, according to the 2011 On the other hand, in grape growing, hosted the 2017 Australian Women in census, there were around 22,000 there has been a 17 per cent decline Wine Awards, celebrating women in people employed in wine manufacturing in employment numbers, with female wine while showcasing the quality and grape growing occupations. numbers declining by more than males. and diversity of Australian wine. The Women made up 35 per cent of the The representation of women has Women in Wine event, held at Australia workforce in wine manufacturing, declined from 28 per cent to 27 per House in London, was the world’s while in grape growing, 28 per cent of cent, with the biggest declines among largest gathering of Australian female employees and business owners were managers and sales workers. It is also winemakers and winery owners and female. disappointing that the number of the first time the event has been held young workers, both female and male, The 2016 census figures show that outside of Australia. has declined significantly between the proportion of women employed the 2011 and 2016 censuses, meaning Winners included Virginia Willcock of in wine manufacturing has increased there are fewer new entrants and an (Winemaker of the Year), from 35 per cent to 38 per cent, and is overall ageing workforce. Only 20 per Sue Hodder of Wynns (Woman of above the overall average for beverage cent of 15–19 year olds in grapegrowing Inspiration) and wine writer Sarah manufacturing (34 per cent) and businesses are female. Ahmed who was named Honorary for all manufacturing (28 per cent). Australian Woman in Wine in the UK. Female employment has increased Overall, employment of women in The array of talent across so many across all occupational categories in the wine sector is still well below categories was remarkable, and wine manufacturing, from labourers 50 per cent. In leadership and senior shows how far the sector has come in and machinery operators to managers roles, female representation has the past few decades. In the 1990s, it and professionals. More than half of been estimated at 8–10 per cent, would have been hard to find a senior the people employed in sales roles are meaning there is still a long way to go female winemaker or viticulturist, with female. Among 15–19 year olds, the for the sector to reflect the broader a few notable exceptions such as Prue proportion of females has increased population. However, there are positive , Pam Dunsford, Vanya Cullen from just over one third in 2011 to just signs of change, particularly in wine and Jane Mitchell. under 50 per cent in 2016. manufacturing roles, while out in the vineyard, challenges remain. The latest census data from the Australian Bureau of Statistics (ABS) reflects the changing demographics in the Australian wine sector, including mixed results in terms of the participation of women.

Wine Australia • State of the Sector • January 2018 25 Wine Australia works closely with the Australian grape and wine community to increase demand and the premium Markets – paid for all Australian wine. Over the next two and a half years, we have the added responsibility of delivering the Australian Government’s $50 million performance Export and Regional Wine Support Package. The $50 million Package aims to grow the Australian wine sector by and outlook showcasing the nation’s wine tourism offering and driving demand for Australian wine exports.

The $50 million Package funding to grow exports is focused in Australia’s two most valuable export markets — ‘Go forward, with a China and the USA — which has also allowed Wine Australia to increase engagement in Australia’s other head full of steam’ important export markets in the UK Head Full of Steam, The Go-Betweens and Europe, Canada and Asia. Recent performances in key markets point to a positive outlook for the Australian grape and wine community.

26 State of the Sector • January 2018 • Wine Australia Rootstock, Sydney 2017 ‘Such a perfect island, Domestic Australian market tucked away in the sea’ The outlook for the domestic market, Australia, Gyroscope where approximately 40 per cent of Australia wine is sold, is optimistic, with many positive signs for winemakers Another positive indicator is the trend There is also growth for Chardonnay after a long period of flat sales and towards drinking higher priced wines. in the on-trade. Matt Dunne, group strong competition from imports. Australian wine sales at below $10 per sommelier for Solotel was quoted in Australian wine sales in the domestic bottle (off-trade) declined by 1 per cent, March 2017 in Luxury magazine saying, off-trade market grew by 4 per cent in while sales $10 per bottle and above ‘In Aria Restaurant in Sydney, it’s value and 1 per cent in volume in the increased by 4 per cent in the 12 months (Chardonnay) overtaken Sauvignon 12 months to 12 November 2017 (IRI ended 12 November 2017, (IRI Market Blanc as the top selling varietal in the Market Edge Liquor), the equivalent of Edge Liquor). This trend is particularly last 12 months’. apparent for Shiraz, where 68 per cent an additional 333,000 cases of wine. Wine Intelligence has identified a of volume growth was at $10 per bottle number of wine consumer trends in its This growth is reflected in data from the and above, compared with Sauvignon most recent Australian Wine Market International Wine and Spirit Record Blanc, where 93 per cent of growth was Landscape report. The report forecasts (IWSR), which shows that adult per wines below $10 per bottle. capita wine consumption in Australia continuing strong growth in lighter style increased to 29.6 litres per annum Chardonnay is also on the way back wines, the category (particularly in 2016, after 5 years in decline. This in the domestic market after a decade among the younger generations) and places Australia 16th internationally in decline. IRI Market Edge Liquor data the sparkling wine category. Australian for annual per capita consumption, shows that in the 12 months ended wine consumers are also increasingly contrasting with French consumption 12 November 2017, the value of bottled looking for diversity in wine offerings of 49 litres per adult per year, the Chardonnay sales in the domestic off- and becoming familiar with alternative highest in the world even though it has trade market increased by 3 per cent, varieties, which represents another been declining for many years. with Chardonnay sales at above $15 per opportunity for local producers. bottle up 7 per cent, while those below The IWSR has forecast that wine sales $15 were flat. in the domestic market will continue to grow by 1.4 per cent per annum over the next 5 years.

Wine Australia • State of the Sector • January 2018 27 There has also been solid growth in Australian wine is well-regarded in entry level/commercial wines at China. Research conducted by Wine $5 per litre and below (less than Intelligence on behalf of Wine Australia ¥60 per bottle retail). This reflects the shows that the number of Australian China (mainland) increasing accessibility of imported wine drinkers in China has doubled and it moving to since 2013. Australia is second only Mainland China is one of the world’s personal, everyday consumption. Wine to France in wine of origin usage. largest and fastest growing markets is becoming a mainstream beverage Australian wine also has a very positive for imported wine. With a population enjoyed by a much broader base of image among Chinese wine consumers: of 1.38 billion, a burgeoning middle class consumers, and a beverage of choice • 90 per cent like the grape varieties we and modernising consumers, it presents for informal meals and relaxing at home. produce enormous opportunities for Australian wine brands and businesses. China Like the overall China market, red • 86 per cent would be proud to serve is rapidly changing and it’s important wine dominates Australia’s exports to wines from Australia to keep abreast of the latest trends mainland China, accounting for 95 per • 85 per cent believe Australia has and insights to grow and harness its cent of the export value. The growth in distinctive wine producing regions market potential. red wine exports has been strong, up • 84 per cent see Australian wine as 65 per cent to $804 million. Another Australian wine has experienced being food friendly, and important trend is the increasing extraordinary growth in exports to • 78 per cent view Australian wine as acceptance of white wine in what is mainland China over the last decade. an expensive/fine wine. predominantly a red wine market. This is The implementation of the China– principally due to an increased number Chinese tourists offer a significant Australia Free Trade Agreement in 2015 of younger Chinese people drinking opportunity for Australian wine gave impetus to an already strong wine who are more open to trying new producers to grow wine sales and market. The export figures for 2017 styles. Australian white wines are part of providing tourism opportunities in wine suggest Australia is well-placed for this this trend, with exports up 33 per cent to regions is a focus of the $50m Package. trend to continue. The value of exports $30 million. Chardonnay is the number The number of Chinese visitors to increased by 63 per cent to $848 million one white wine and exports increased by Australia has more than doubled over and volume by 54 per cent to 153 million 32 per cent to $14 million. Other whites the past five years to 1.33 million in litres. The average price increased by that grew include Riesling (up 77 per the year to September 2017. 6 per cent to $5.55 per litre FOB. cent to $3 million) and Semillon (up Mainland China is the number one 29 per cent to $2 million). For China, the opportunity lies in destination for Australian wine growing penetration of premium exports by value. Wine Australia’s Head of Market, China Australian wine through both on- and Willa Yang said, ‘China is one of the off-trade channels. For imported wines, Australia is outpacing key competitors in most dynamic and exciting wine markets 60 per cent of the volume of sales are the growth of wine exports to mainland in the world and is providing enormous through the off-trade and 40 per cent China. It is ranked second behind opportunities for premium Australian through the on-trade. Australia is well- France in market share, but number wines to find new markets and placed in both the on-trade and off- one in the average price of bottled wine customers, who are seeking products trade. According to the IWSR, in 2016 among the five biggest exporters. In of exceptional quality. Australia held a 15 per cent share of October 2017, Australia overtook France imported sales in the on-trade and in the value of wine exported to China ‘Chinese consumers are attracted to 16 per cent share of the off-trade. There for the month for the first time. foreign brands as they aspire to Western is also the opportunity to increase life and strongly associate quality with There was growth in exports to mainland awareness of Australian wine by talking imported products. This is especially China across all price points, from to consumers and educating them on true for Australian products that Chinese entry level/commercial wines through usage occasion. consumers perceive are high quality, to Australia’s fine wines. healthy and authentic. The growth in Exports are heavily weighted to more this trend can also be seen across other premium wines. Mainland China is by categories such as Australian , far the biggest destination for exports of seafood and horticulture.’ $10 or more per litre FOB (¥110 or more per bottle retail), accounting for more than half of all Australia’s exports at this price point. These exports grew by ‘I tell you folks, it’s 75 per cent to $377 million in the last year and the growth accelerated as harder than it looks, it’s exports in this price segment increased by 47 per cent in 2016. a ’ It’s A Long Way To The Top, AC/DC

28 State of the Sector • January 2018 • Wine Australia Figure 11: Average bottled export value for Australia’s top ten export destinations

A

16.00

14.00

12.00

10.00

8.00

6.00

4.00

2.00

0.00 China USA UK Canada Hong Kong New Singapore Germany Malaysia Japan Zealand

Australian wine is well-placed in Hong Australian wine will take centre stage Kong, ranked second behind French at Vinexpo Hong Kong 2018, as Australia wine sales in 2017. has been selected as the Country of Honour for the exhibition in May. Hong Kong is the fifth most valuable China (Hong Kong) Vinexpo Hong Kong is the key trade- Australian wine export destination. In only wine and spirits exhibition in the The Hong Kong wine market is an 2017, the value of exports to Hong Kong Asia-Pacific region. The invite-only important market and quite different increased by 7 per cent to $118 million event attracts top decision-making to the wine markets in other parts of and volume increased by 4 per cent to importers, buyers and , and China. Hong Kong is a vital trading hub 8 million litres. provides a forum for education and and an important point of access to The average value of exports to Hong trade networking. This event will provide mainland China. Not all Australian wine Kong increased by 3 per cent to a platform for Australian wine to expand exported to Hong Kong is consumed in $14.06 per litre. Hong Kong has the its already strong position in Hong Kong the territory. Of the imported wines highest average value among the top and the wider Asia region. not consumed in Hong Kong, some 30 destinations to which Australia 95 per cent is sent to other parts of China, exports and more than three-quarters principally mainland China and Macao. of exports to Hong Kong are valued The Hong Kong wine market has been at $10 or more per litre. This indicates forecast by the IWSR to grow by the success and popularity of some 2 per cent per annum over the of Australia’s finest wines in that 4 years to reach 4.1 million cases by market, where there is zero tax on wine. 2021. At 5.1 litres per adult, per capita Australian fine wine exports to Hong wine consumption in Hong Kong is Kong have steadily grown over the last significantly higher than in mainland decade and the territory is now the China (1.2 litres per capita). According second largest destination for Australian to Wine Intelligence, there were wine exports above $10 per litre, behind 1.9 million drinkers of imported wine mainland China. Like mainland China, in Hong Kong, with 680,000 people red wine dominates Australian exports drinking Australian wine. at this price segment, with a 96 per cent value share.

Wine Australia • State of the Sector • January 2018 29 ‘You’ve done it once, you can do it again’ Pleasure and Pain, Divinyls

‘With exports above A$10 FOB per litre There’s no question that there is still seeing solid growth for the period, much work to be done in the USA momentum is building behind wines that market to ensure this short-term trend underpin the category’s premiumisation towards premium Australian wine United States of America trend. Australia is building strength and becomes a significant and sustainable sustainable positioning at premium phenomenon. Hard work and challenges With a complex wine market and price points through an increasingly are much easier to face when there are lingering perceptions amongst some diverse offering of regions and varieties. prospects for success in the end. consumers that Australian wine is a one- It all bodes well for the next 12 months dimensional category, the United States Current positive economic conditions and beyond’, Aaron Ridgeway, Head of of America (USA) remains a challenging in the USA suggest disposable income Market, Wine Australia market for many Australian wineries. is growing, creating an opportunity While key trade and opinion leaders The critical issue for the Australian wine for increased expenditure on wine. have been praising Australia’s dynamic category is that it lacks penetration in The decline in the Australian dollar and diverse wine scene for several the premium market — Australia holds over recent years has created further years, there is still a long way to go only 1 per cent of the market at opportunity for Australian wine. Three in terms of representation in the US$11 or more per bottle. Australia is of Australia’s four major banks expect premium market. also under-represented in the USA on- the Australian dollar to be below 75c at trade market. According to Nieslen/CGA the end of 2018, with the only exception The tide may be turning though with Strategy, the USA on-trade market was being the Commonwealth Bank, the 2017 export figures showing some valued at US$17 billion in the 12 months which forecasts 85c. Wine Intelligence optimistic signs in key premium wine ended 15 July 2017. Australia was ranked research identifies the USA as the segments. There is also promising seventh with sales of US$283 million, world’s most attractive wine market. research that identifies signs of a bright representing a market share of 1.7 per future for Australian wine in the USA. Millennials (people aged 21–36) are cent. If we matched our off-trade value arguably the most important group Currently, Australian wine exports to share of 3.6 per cent, this would see among regular USA wine drinkers. the USA are heavily weighted to the Australian sales in the on-trade increase According to Wine Intelligence, they commercial end with 95 per cent of the to over US$600 million, more than represent a third of the USA wine volume priced at below $5 per litre (less double our existing sales value. drinking population and are growing than US$8 per bottle retail). Australian However, this suggests there is in size. They are frequent and exports in this segment declined by significant upside for premium high-spending wine consumers and 2 per cent to $368 million. This is Australian wines in the USA. Recent are driving the premiumisation trend reflected in the retail figures. Australia research conducted by Wine Intelligence in wine sales in the USA. However, holds a 13 per cent share of the off- on behalf of Wine Australia suggests they lack awareness of Australian trade market at US$4–7.99 per bottle that the perceptions of Australian wine wine, particularly those in the according to IRI figures for the are gradually improving. 25–34 age bracket. 12 months ended September 2017. This price point is the biggest segment of the The quality rating of Australian wine ‘People should drink Australian wine USA off-trade market with just over a among regular wine consumers in because it’s probably not what they third share but it is in decline. the USA has increased from 7.82/10 think it is. There’s this whole new wave to 8.13/10 in 2017. Furthermore, the of producers and a whole new wave of In sharp contrast, the positive trend percentage of regular wine consumers wine styles.’ Joe Czerwinski, Managing towards Australian premium wines in the in the USA who recognised Australia Editor of Robert Parker Wine Advocate. USA continues. Exports at $10 per litre for its expensive/fine wines increased or more (US$14 or more per bottle retail) In the USA, the opportunity is to re- from 37 per cent in 2010 to 46 per cent increased by 8 per cent to $45 million. ignite the Australian wine category at in 2017. In contrast, reflecting Australia’s The growth in premium wine exports to the higher value end of the market, for strong position at the commercial end the USA is also evident in retail figures. wines retailing at US$11–$25 per bottle of the market, 91 per cent of regular Off-trade sales figures from IRI show at and in the on-trade. wine consumers viewed Australian wines US$11 or more per bottle, Australian sales as good value for money. grew by 32 per cent while the total sales in this segment increased by 7 per cent.

30 State of the Sector • January 2018 • Wine Australia Data from the Canadian Vintners Association shows that Quebec, at 18 million cases sold, is the biggest provincial wine market in Canada Canada ahead of Ontario (15 million cases). As a French-speaking province, it is not Canada is Australia’s fourth biggest surprising that France is the number market by value but has been a one country of origin with a 23 per challenging market in recent times. cent volume share, ahead of Italy In 2017, the value of exports to Canada (19 per cent), Canada(12 per cent) declined 3 per cent to $187 million and the USA (10 per cent). Australian and volume increased 2 per cent to wine is ranked fifth with a 10 per cent 62 million litres. An increase in bulk wine share. The volume of Australian wines exports and a decline in bottled exports sales in Quebec in the 12 months was the principal factor in the decline in ended November 2017 grew 3 per cent, value. Bottled exports fell by 7 per cent matching the overall market growth rate to $151 million, more than offsetting an and taking share from wines from the 18 per cent increase in bulk exports USA, which declined by 10 per cent. to $33 million. Wine Australia General Manager Canada is a particularly strong Marketing Stu Barclay said, ‘Wine market for Australia’s premium white Australia is committed to investing in wines. Canada is Australia’s number the Canadian market over the next one market by value for white wines three years, and has allocated an at A$5 or more per litre (C$12 or additional full-time team member into more per bottle retail). the Ontario market to support our Five provinces accounted for 98 per existing team based in . cent of Australian wine exports to Our Canadian team are investing Canada: increased funds in category thematics, • Ontario (38 per cent share) retail staff training and activating to bring key buyers into Australia to • British Columbia (24 per cent) support the provincial liquor boards. • Quebec (22 per cent) Increased engagement for promotional • Alberta (9 per cent), and support across all provincial liquor • Scotia (5 per cent). boards as well as within key activities, such as Vancouver International Wine Exports to Quebec increased Festival, will grow the awareness of marginally and were stable to the premium Australian wine category Alberta but declined to Ontario with key influencers in this strategically British Columbia and Nova Scotia. important wine market.’

Australian WIne Week, 2017

Wine Australia • State of the Sector • January 2018 31 Figure 12: UK off-trade wine market by price point, 12 months ended 11 November 2017

£20.01 + otal aret Australia £10.01 – £20.00

£9.01 – £10.00

£8.01 – £9.00

United Kingdom £7.01 – £8.00

More Australian wine is shipped to the £6.01 – £7.00 UK than to any other market. In 2017, 223 million litres were exported to the UK £5.01 – £6.00 placing it ahead of the USA (172 million litres) and mainland China (153 million £4.01 – £5.00 litres). However, 80 per cent of this wine Up to £4.00 is shipped in bulk and bottled in market, which pulls down the reported value of -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% exports as Wine Australia reports the value when it leaves Australia, rather Source: IRI than its value in market.

Australia remains the number one country of origin in the off-trade market, but is third in the on-trade ‘I’m in ’ behind France and Italy. Of the top 14 brands in the UK off-trade by value, London Still, 6 are Australian (IRI).

Australian wine exports to the UK declined in value by 2 per cent to These factors contributed to a 2 per The growth in these varieties reinforces $348 million and in volume by 5 per cent decline in Australian exports of the UK market as a leader in innovation cent. However, the overall value decline commercial wines at $2.50–4.99 per litre and very open to new products. was due to an 8 per cent decline in bulk to $95 million (less than £9 per bottle This is supported by recent research wine exports to $169 million, which more retail). The decline in this segment was published on the UK market by Wine than offset a 5 per cent increase in a major influence on the overall decline Intelligence. They reported that while bottled exports to $179 million. in exports to the UK. traditional varieties are still the top This reflects the market trends that At the other end of the price spectrum, sellers, other varieties are growing. have seen wine sales in the UK off-trade there was solid growth in exports at For example, for whites, the proportion grow at above £5 per bottle, while $7.50–9.99 per litre (£11–12.99 per bottle of consumers saying they had drunk sales under £5 per bottle are declining. retail), up by 3 per cent to $13 million. in the last 6 months increased Figure 12 illustrates that there has been from 9 per cent in 2013 to 11 per cent There was strong growth in exports of particularly strong growth in the UK off- in 2016. trade at the premium end of the market. Australia’s three biggest varieties. Shiraz The big volume commercial end of the exports increased by 15 per cent to The key growth opportunity for UK market has seen retail consolidation $45 million and Chardonnay also by Australian wines in the UK market is resulting in reduced product ranges. 15 per cent to $34 million. at above £10 per bottle, where the category is under-represented. The Brexit negotiations are also causing There was also growth in a range of on-trade and independent channels uncertainty and while the subsequent more alternative varieties and blends, also offer upside for Australia. Sarah appreciation of the Australian dollar highlighting the richness and diversity Knowles MW, The Wine Society’s has negatively impacted on exports, of Australian wine. While they are Australian Wine Buyer suggests, ‘For the British pound (GBP) has recovered relatively small categories, they are me, Australian wine offers exceptional to a degree. However, the excise duty big on unique expression, innovation value between £15–25, where you on alcohol is increasing faster than and consumer appeal. Some of the can really try some very fine wines at inflation and this has had a bigger alternative varieties and blends on the approachable prices.’ impact on the commercial end of the rise in the UK include , Viognier/ market compared to the premium end, , Viognier/Chardonnay, resulting in some price bracket creep. , Verdelho, , and .

32 State of the Sector • January 2018 • Wine Australia presenting opportunities for Australian As with many developed nations, in wine producers. Australian exports are Sweden there is a trend towards natural ranked seventh, behind the big three, as and organic products. Systembolaget, well as South Africa, Chile and the USA. the Swedish alcohol monopoly, Chilean wines have been rising steadily, announced in 2013 that it aimed to while French wines are in long-term have certified organic products make decline, according to the IWSR. up 10 per cent of its offering by 2020. It has already achieved this goal. In 2016, Germany is Australia’s eighth largest Systembolaget’s sales market by value and fifth biggest by increased by 21 per cent to 40 million Europe (excluding UK) volume. The lower value ranking is due litres. Sweden is Australia’s number one to more than 80 per cent of Australian The 2017 export figures offer destination for organic wine; making up wine being shipped in bulk containers. encouraging signs of growth across one third of export value. a number of markets in Europe, but Australia exported 40 million litres to While Denmark, Norway and Finland particularly for Germany (up 26 per Germany at a value of $57 million in are smaller markets, they are cent to $57 million), the (up 2017. Value increased by 26 per cent experiencing similar market trends to 16 per cent to $36 million) and and volume by 13 per cent. Sweden: their total wine consumption (up 13 per cent to $16 million). Like the growth rates are relatively steady and UK, wine sales are dominated by off- Reflecting the bulk shipments, exports organic wines are making headway. trade sales through the supermarkets. below $2.50 per litre (under €3 per According to Euromonitor International, There is upside for Australia in each bottle retail) increased by 25 per cent organic wines in Denmark are growing market: Australia ranks seventh in to $37 million, with much of this wine well, with the Irma supermarket chain Germany, eighth in the Netherlands destined for German supermarkets. reporting a 20 per cent increase and ninth in Belgium for wine imports. There was also growth at the premium end, with exports at $10 or more per litre in organic wine sales. There are Elsewhere there are heartening growth (€11 or more per bottle retail) increasing similar movements in the Norwegian figures for Australian wine exports: by 26 per cent to $4 million. Since 2011, and Finnish markets, although less • Finland grew 11 per cent to $17 million the value of exports at $10 or more pronounced. per litre to Germany has grown by an • Norway grew 15 per cent to $7 million While Australian exports to Sweden average of 11 per cent per annum. This • grew 2 per cent to and Denmark declined in 2017, exports suggests that while Germans are very $7 million to Finland increased by 11per cent to price conscious, there is a market for $17 million and to Norway by 15 per cent • Russia grew 18 per cent to $5 million, Australia’s finer wines. to $7 million. and • Poland grew 15 per cent to $4 million. The Nordics After Sweden, Finland is the next Nordic country to receive the most organic The Nordic wine market is an attractive Germany Australian wine. In fact, the value of opportunity for many wine producers. organic wine shipped to Finland has Germany is the world’s biggest Sweden, Norway, Finland and Denmark nearly doubled in the past year to imported wine market and fourth largest are known for their wealth, open- $1.3 million. Norway emerged from wine market overall. According to the mindedness and high standard of living. receiving no organic exports in 2016 to Global Trade Atlas, Germany imported Each have well-developed wine cultures. now receiving over $200,000 worth. 1.45 billion litres of wine in 2016–17. The growing popularity of organic wine This puts Germany ahead of the UK is now giving this region an added point (1.37 billion litres) and the USA of interest. (1.16 billion litres). It is also one of the world’s most developed wine markets, with two-thirds of the adult population being wine drinkers. At 30 litres per head, Germans are ranked 15th in the ‘I cherish my world for average wine consumption. Consumption has been in decline for intercontinental much of the last decade, but it is now stabilising. friendships, over More than three-quarters of the wine Germany imports is from the big three European producers — Italy, France continental breakfasts’, and Spain. All three countries recorded Continental Breakfast, Courtney Barnett and historically low harvests in 2017,

Wine Australia • State of the Sector • January 2018 33 Asia (excluding China) While the growth to China has been ‘From little things, extraordinary, the value of exports to the rest of Asia, excluding China, has big things grow’ increased by 1 per cent to $247 million and volume has increased by 13 per From Little Things, Big Things Grow, and Paul Kelly cent to 38 million litres. Half of the exports to the region are wines priced at $10 or more per litre.

There are eight destinations with exports of $5 million or more and there were mixed results among them: • Singapore grew by 9 per cent to $75 million • Malaysia fell by 7 per cent to $50 million • Japan grew by 3 per cent to $47 million • Thailand grew by 9 per cent to $20 million • South Korea grew by 5 per cent to $14 million • Taiwan fell by 22 per cent to $13 million • grew by 33 per cent to $9 million, and Australian Grand Tasting, Tokyo 2017 • grew by 51 per cent to $5 million.

Australian wine is well-placed in these key Asian markets, with market shares of more than 10 per cent and ranked among the top four countries of origin in all but Japan and South Korea, where Australia is ranked sixth, but the introduction of a free trade agreements with each country may provide some impetus for Australia to gain market share.

34 State of the Sector • January 2018 • Wine Australia Japan South Korea

Japan is the tenth biggest destination More than 80 per cent of the alternative The Korea–Australia Free Trade for Australian wine exports. Since the packaging exports to Japan are cans. Agreement (KAFTA) came in to force Japan–Australia Economic Partnership Cans are extremely popular in Japan. on 12 December 2014, removing a Agreement (JAEPA) came into force Practically all types of beverage are 15 per cent tariff on Australian wine on 15 January 2015, Australian wine available in cans in Japan. Wine in and helping bring Australia to an even exports to Japan have increased from alternative packaging such as cans or playing field with its competitors. $39 million to $47 million. pre-packaged by the glass is targeted Since the introduction of KAFTA, exports at the younger consumer in Japan. Under the Japan–Australia Economic to South Korea have increased from Research from Wine Intelligence Partnership Agreement (JAEPA), the $8 million to $14 million. The excitement suggests that younger Japanese tariff on bulk wine was immediately cut generated at trade events such as the consumers tend to drink less than the to zero and this has contributed to bulk Australian Wine Grand Tasting Seoul older generation. Cans and glasses wine exports increasing by 51 per cent in September 2017 offers optimism offer the ability for younger consumers to $4 million in 2017. The tariff on bottled for future growth prospects and has to enjoy one or two glasses rather than exports will reduce to zero by 2022. The contributed to a 5 per cent increase in a full bottle. tariff reduction to date has provided a Australian wine exports in 2017. boost to the volume of bottled exports, Japan is by far the second biggest South Korea is the fourth biggest still up 4 per cent to 8 million litres, the wine market in Asia behind mainland wine market in Asia with 3.4 million largest volume of bottled exports in a China. IWSR reports that 39.5 million cases sold in 2016, according to the decade. This has come at the expense of cases of wine were sold in Japan in IWSR. This equates to 0.8 litres per adult price, with the average value of bottled 2016, compared to 157 million cases in per year. In other words, a little over one exports down 5 per cent to $4.96 per mainland China and 3.8 million cases in bottle of wine per year per person. litre FOB. This is not unexpected as third-placed Hong Kong. After growing demand for commercial wines is more by 6 per cent per annum between 2007 Australian wine is the sixth ranked price sensitive than for premium wines. and 2015, wine sales in Japan declined imported wine in South Korea behind Consequently, the value of bottled by 4 per cent in 2016. The IWSR expects wines from Chile, Spain, France, the exports to Japan declined by 1 per cent the market to be flat over the next USA and Italy. However, Australian wine to $38 million. five years. exports to South Korea have flourished over the past two and half years since An interesting trend in Australian exports Imported wines account for 71 per cent the introduction of KAFTA. to Japan has been very strong growth of the Japanese wine market. Australia, in soft-packs and alternative packaging. with 1.2 million cases sold, ranks sixth The IWSR expects the recent strong Exports of wines in soft-packs grew behind Chile, France, Italy, Spain and growth for Australian wine in South by 7 per cent to $3 million and in the USA. All but Chile recorded a decline Korea to continue, forecasting alternative packaging such as cans by in sales in 2016. Australian wine sales to grow by 6 per cent to $2 million. Japan is the 11 per cent annum in the five years The positive news is that the IWSR largest destination for Australian wine to 2021 compared to growth of 4 per expects Australia to be one of the few exports in soft-packs and alternative cent per annum for Chile and 1 per imported wine countries to increase packaging with a 21 per cent share of cent per annum for Spain, while they sales in Japan over the next five years, soft-pack exports and a 36 per cent are predicting declines for wines from predicting a growth rate of two per cent share of alternative packaging exports. France (down 1 per cent per annum) per annum through to 2021. A key factor Importantly, exports in alternative and the USA and Italy (each down is JAEPA. This will make Australian wines packaging to Japan achieved a 3 per cent per annum). more competitive. relatively high average price of $6.97 per litre compared to the bottled The IWSR predicts that Australian sales average price of $4.96 per litre. will grow at 4 per cent per annum in the premium to super premium segments (¥1000–¥3000 per bottle, which roughly equates to $5–$30 per litre FOB). Australia currently holds a 4 per cent share of this market; if the growth predictions are realised, this will grow to 5 per cent.

Wine Australia • State of the Sector • January 2018 35