Empirical Economic Analysis of Wine Globalisation

Australia's place in the world's wine markets by 2030: empirical economic analysis of wine globalisation

FINAL REPORT to the Australian Grape and Wine Authority

Project Number: UA 08/04 Principal Investigator: Kym Anderson

Research Organisation: Wine Economics Research Centre, University of Adelaide Date: 05 March 2015 2

Australia's place in the world's wine markets by 2030: empirical economic analysis of wine globalisation

Kym Anderson

Wine Economics Research Centre University of Adelaide [email protected]

Revised 05 March 2015

Final report of GWRDC Research Project UA 08/04. While the author is grateful for financial support from the GWRDC (now AGWA) and the University of Adelaide’s Wine 2030 Research Network (now Wine Futures), its Faculty of the Professions and its School of Economics during 2008-14, the views expressed are the author’s alone and not necessarily those of the providers of funds. 3

Table of contents

Page Abstract iv

Executive Summary v

Background 1

Project aims and performance targets 2

Method 4

Discussion of results 5

Conclusions and recommendations 15

Appendix 1: Communication 17

Appendix 2: Intellectual property 18

Appendix 3: List of project publications and conference presentations 19

Appendix 4: Staff 27

Appendix 5: Databases 28

Abstract

This project set out to improve our understanding of the economic and market consequences of supply and demand trends in – and of various shocks to – the winegrape and wine markets in Australia and abroad in recent years and prospectively to 2030. The project resulted in several times the promised outputs including 10 industry journal articles, 11 economics journal articles, 3 books, 2 chapters in other books, 4 large databases, 19 other publications, and 40 presentations at conferences and workshops in Australia and abroad. The outputs covered a wide range of issues including impacts of possible changes to alcohol consumption taxes, regional consequences of shocks, effects on competitiveness of recent and prospective real exchange rate movements, effects of developments in China, the evolving varietal distinctiveness of wine regions in Australia relative to the rest of the world, R&D’s role in Australia’s wine industry growth, and lessons from history for Australia’s latest wine industry boom-slump cycle.

Executive Summary

The long-run growth of the Australian wine industry has been characterized by cyclical booms followed by long slumps in profitability. The length of those cycles from boom to bust and back to the next boom has ranged from 20 to 30+ years. The latest cycle was about 20 years, from the low prices in 1986 to the low prices in the latter half of the previous decade. A key question being discussed intensively within the industry at the outset of this project was: what is in store for the next two decades as growers recover from drought and adapt to water policy changes and the double threats of climate change and increasing competition from other wine-producing countries (due in part to the real appreciation of the AUD induced by the mining boom)?

The best way to assess market prospects is to develop pertinent empirical models of those markets, to calibrate them to the latest year for which the essential data are available, and to project them to a future year of interest. Both a national economy-wide model and a global model of wine markets were employed for present purposes. The first step was to update and expand available models and their databases. The global model was expanded to include 5 different wine quality types and two different grape types (premium and non-premium). To revise its database we updated, expanded and re-published our Global Wine Markets Statistical Compendium, which for the first time now disaggregates national wine markets by quality and provides information on consumer and import taxes for all the key markets. We were then able to undertake a wide range of empirical analyses.

Highlights of the results from our analyses include the following:

Alcohol taxation. On the assumptions made in this research, a change from the current ad-valorem tax to a similar-revenue volumetric tax on domestic wine sales would cause regional GDP to rise in the cool and warm wine regions, but GDP in the hot wine regions would fall substantially.

The switch to a volumetric tax as high as the standard beer rate is estimated to raise tax revenue and to lower demand for domestic wine by more than one-third. It would also induce a one-third decrease in production of non-premium wine, because its consumer price would rise by at least three-quarters (while the average price of super-premium wines would change very little).1

Wine consumers in Australia face taxes far higher than in most other wine-producing countries, especially for premium wines. Even assuming that premium wine consumers are the least likely alcohol drinkers to impose external costs on society,2 it could be argued that the wine tax rate should be lowered if those taxes are aimed solely (which of course they are not) at reducing the social costs of alcohol abuse. If a switch from an ad valorem to a volumetric tax was possible without the overall level of wine industry taxation being raised, producers would be encouraged to deliver higher-quality wines – which is more consistent with where the country’s comparative advantage is moving.

1 Commercial-premium still wines are defined by Anderson and Nelgen (2011) to be those between US$2.50 and $7.50 per litre pre-tax at a country’s border or wholesale, while they define super-premium wines as above $7.50 and non-premium wines as below $2.50 per litre pre-tax. 2 Empirical evidence of the low social costs associated with premium wine consumption in Australia is provided in Yang, O., X. Zhao and P. Srivastava, “Binge Drinking, Antisocial and Unlawful Behaviours, and Beverage Types”, Melbourne Institute Working Paper No. 3/15, University of Melbourne, January 2015. 6

Effects on national competitiveness of recent real exchange rate (RER) developments. During 2007 to 2011, Australia experienced a one-third real exchange rate (RER) appreciation against the US dollar. Other Southern Hemisphere wine exporters (Chile, New Zealand, South Africa) also saw their RERs appreciate, but more moderately (by 9-23 percent). By contrast, the RERs of other Western European countries – both wine-exporting and wine-importing – remained close to the USD during that period. Australia thus experienced one of the largest real appreciations among the wine exporters, which is why its wineries received less AUD for their exports and faced more foreign competition in the domestic market.

The RER changes reduced grape and wine production in the Southern Hemisphere where RERs appreciated, while in the United States and in Europe, where RERs changed relatively little, production increased slightly. Since Australia had the largest appreciation of the wine-exporting countries, its winemakers and hence grapegrowers are estimated to have suffered the largest reduction in domestic prices in real local currency terms: wine-grape and commercial-premium wine producer prices were reduced by almost one-eighth, and super premium wine prices by one-fifth due to these RER shocks.

Real prices in domestic currency terms are estimated to have declined in the other Southern Hemisphere countries as well, but by less than two-thirds as much as in Australia, while real grape and wine prices (again in domestic currency terms) rose in the United States and Western Europe, by between 3 and 6 percent (so output is estimated not to have been reduced at all in those regions as a consequence of RER movements in that 2007-11 period). In aggregate, RER movements over the 2007-2011 period are estimated to have reduced Australia’s annual wine exports by 64 ML. This is more than half the aggregate loss to all other Southern Hemisphere exporters of 110 ML, and it contrasts with estimated export gains of 193 ML to the United States and 167 ML to Western Europe’s key wine-exporting countries. This reversed somewhat the massive gains of the Southern Hemisphere exporters at the expense of the Old World over the past two decades. It also strengthened the competitiveness of the US wine industry relative to other New World wine producers in both the US and European markets.

In addition to losing export sales, Australia has also seen an increase in imports. One-sixth of the estimated extra imports due to currency changes are from New Zealand, because of the greater real appreciation of the AUD compared with the NZD. New Zealand’s extra penetration of the Australian market is especially strong in the super-premium+ category (predominately Sauvignon Blanc and Pinot Noir), while France’s is predominantly in sparkling wine and Italy’s in commercial-premium wines.

Effects on competitiveness of prospective real exchange rate developments. RER changes can, of course, reverse, and indeed the AUD has depreciated considerably in the past 18 months. Our empirical model suggests that over that period 2011 to 2018, Australia’s non-premium grape and wine prices would fall further if RERs did not change from their 2011 levels, while super-premium and iconic still wine prices would rise by more than 40 percent. If, on the other hand, RERs were to return by 2018 half- way back to what they were in 2009, real prices in Australia in local currency terms would rise above 2011 levels for most grape and wine types, especially for super-premium+ wines. The extent of those rises would be somewhat but not substantially less if China’s import growth were to slow.

Effects of developments in China. China has already become by far the most important wine-consuming country in Asia, and it remains the market in which wine exporters anticipate the highest rate of import growth in the future. This is consistent with our modelling. China’s domestic production is projected to increase by ‘only’ about 210-290 ML by 2018, or much less than projected consumption growth, so that 7

its net imports are projected to rise by between 330 and 740 ML. The Southern Hemisphere is projected to supply around half of those extra imports, with Australia projected to supply between 65 and 150 ML of China’s extra imports, amounting to between USD350m and 650m per year. That represents about one-fifth of China’s total import volume increase and, more importantly, around one-quarter of the value of China’s extra imports. Australia’s exports to all destinations other than Asia are projected to decline if RERs stayed at 2011 rates, but if exchange rates were to settle at half-way back to those of 2009, Australian total annual exports would increase by 90 ML to become about one-eighth more than in 2011.

The impact of the scenario on the USD value of total exports from Australia is much greater though, ranging from a 20 percent to 50 percent rise over 2011 values. There is little joy for Australian producers of non-premium wines (and thus grapes) in these projections, however: their exports are expected to fall. This is partly because only a fraction (between one- and two-fifths) of the increased volume of imports by China is projected to be non-premium wines. These projections point to the enormous speed with which China could become a dominant market for Australian wine producers. It would be somewhat less if China’s own wine-grape production increases faster than expected, however, or if the Government’s current austerity drive were to persist.

Evolving varietal distinctiveness in the world’s and Australia’s wine regions. Globalization of the world’s wine markets over the past two to three decades has added to both opportunities and competitive challenges for producers seeking to differentiate their product to attract the attention of discerning consumers. The traditional practice in the Old World of displaying regional names on wine bottle labels is increasingly being supplemented by grape varietal names. Meanwhile, producers in Australia are realizing the marketing value of following Europe’s traditional producers in going beyond country of origin to regional and sub-regional labelling so as better differentiate their product. In addition to striving to product-differentiate, producers are also well aware of the impact climate change is having on their winegrapes. Adaptation strategies include switching to warmer-climate or more-resilient grape varieties, and re-locating to regions at higher latitude or altitude so as to be able to retain the firm’s current mix of grape varieties. Numerous regions in Australia are still trying to identify their varietal comparative advantages, and winegrowers are continually on the lookout for attractive alternative varieties that do well in climates similar to what they expect theirs to become in the decades ahead. A small but growing group of producers are thus exploring alternatives to the dominant varieties.

However, no wine atlas or wine encyclopaedia provides comprehensive global data on the bearing areas of winegrapes by region and variety. To fill this lacuna, we have compiled such a global database and provide several indicators to capture changes over the first decade of this century in the varietal mix of the world’s wine regions. It shows that the varietal distinctiveness of Australia vis-à-vis the rest of the world, and varietal differentiation between regions within the country, are far less than for other countries – a pattern that has become even more pronounced since 2000. This suggests there is much scope for Australia’s winegrape plantings to become more diversified as producers respond to market and climate changes. Even the more-detailed 2012 data for South Australia, which include not-yet- bearing new plantings, reveal that well under 2 percent of the vineyard area is devoted to so-called emerging or alternative varieties.

Australia’s latest wine industry cycle in historical perspective. Grapegrowers and winemakers in both the Old World and the New World are far more exposed to shocks to the world economy now than they were in the 20th century. This is partly because of the move by most countries to flexible exchange rates since the 1980s, and also because the wine industry has become more globalised in the past two decades 8

than ever before in its long history. The share of global wine production exported rose from 15 percent in the late 1980s to more than 40 percent today. Australia’s wine industry has had previous periods of export-led growth though, which begs the question of how well it handled shocks such as recessions/depressions in earlier eras. This led to the decision to update and expand our historical database of the industry’s development. In doing so we realized there would be value in expanding the task in three dimensions: incorporating data on Australia’s wine regions by State/colony back to the 1840s; including information by region on evolving winegrape varietal mixes; and including data on changing macro conditions in the Australian economy.

We are now in a position to generate charts and expand the text of our 1998 booklet so that a new book and online e-book can be published by the University of Adelaide Press before Christmas 2014. The text of that book will lay out key features of the trends and cycles in the development of the industry, drawing the reader’s attention to the indicators of those developments and to the main drivers of them as revealed in the many charts and tables that make up the bulk of its several hundred pages. It leaves open for further research the task of explaining econometrically those rates of growth and turning points in the industry’s development over the past 170 years, and drawing lessons for current and future investors.

Australia's place in the world's wine markets by 2030: empirical economic analysis of wine globalisation

Background

Traditionally the long-run growth of the Australian wine industry has been characterized by cyclical booms followed by long slumps in profitability, with cycles from boom to bust and back to the next boom ranging from 20 to 30+ years.3 The latest cycle was about 20 years, from the low prices in 1986 to the low prices in the latter half of the previous decade. A key question being discussed intensively within the industry at the outset of this project was: what is in store for the next two decades as growers recover from drought and adapt to water policy changes and the double threats of climate change and increasing competition from other wine-producing countries (due in part to the real appreciation of the AUD induced by the mining boom)?

An immediate initial question was: how will the various wine regions within Australia perform? The project therefore began by compiling data on the different economic contributions and characteristics of the country’s wine regions, and then modelling how the various regions would cope with such things as a decline in demand for Australian wine exports or a change in domestic consumer taxes on alcoholic beverages. The only way to provide empirical answers to such questions is to develop and apply realistic economic models of wine markets at home and abroad. Our extensive consultations with industry individuals and bodies such as WFA and AWBC, as well as the Steering Committee of the University of Adelaide’s Wine 2030 Research Network (co-chaired by Terry Lee and Brian Croser), revealed a keen interest in such analyses being undertaken.

This project thus set out to improve our understanding of the economic and market consequences of supply and demand trends in – and of various shocks to – the winegrape and wine markets in Australia and abroad over the period to 2030.

For various reasons this planned 3-year project got off to a slow start and had spent little of its $562.5k budget by 2010, so GWRDC asked in September 2010 for approximately half of the original sum to be returned for use in its other projects. Thus $254k or 45% of the original allocation was not used for this project. Nonetheless, numerous outputs continued to be produced each subsequent year thanks to some extra research funding from the Faculty of the Professions in 2014 in addition to the substantial in-kind support throughout the six years from the University of Adelaide’s School of Economics, Wine 2030 Research Network, and Faculty of the Professions.

3 Osmond, R. and K. Anderson (1998), Trends and Cycles in the Australian Wine Industry, 1850 to 2000, Adelaide: Centre for International Economic Studies. http://www.adelaide.edu.au/wine- econ/papers/Aust_Wine_Trends_and_Cycles_1998.pdf, and since updated in K. Anderson (with the assistance of N.R. Aryal), Growth and Cycles in Australia’s Wine Industry: A Statistical Compendium, 1843 to 2013, Adelaide: University of Adelaide Press, 2015. 2

Project aims and performance targets

The key aims of the project were as follows:

Year 1, 2008-09:

. Develop the world wine model for use in projecting to 2030 for a range of grape and wine types for all the key traditional and prospective markets for wine, updating its data base by beginning to expand and update the Global Wine Markets Statistical Compendium;

. Modify the TERM model of the Australian economy to ensure sufficient disaggregation by region and by product to be relevant to the wine industry and to accommodate the latest water arrangements so that competition between users of that resource (in addition to land) is adequately captured;

. Survey the literature on climate change as it affect winegrape production (and that of crops competing with grapes for water and land), following the preparation in early 2008 of a UofA paper commissioned for the Garnaut Review of Climate Change (led by Professor Christopher Findlay); and

. Provide the first preliminary projections to 2030 by mid-2009.

Year 2, 2009-10:

. Put together a network of collaborators abroad to complete the update of the database in the Compendium and for the world wine model;

. Bring that team together in February 2010 for a workshop in Adelaide that could form the basis for producing papers and ideally chapters for a forward-looking book on the world’s wine markets to 2030 (the extensiveness of which will depend on efforts to raise additional funds and intellectual interest in 2009); and

. Produce a stream of articles and conference papers using the national and global models, topics of which will depend on industry priorities at the time.

Year 3, 2010-11:

. Update the global model using the new Compendium data (and update the TERM model as needed);

. Produce a further stream of articles and conference papers using the national and global models, topics of which will again depend on industry priorities at the time; and

. Consolidate the publishing and dissemination of research findings.

Expected outcomes were an improved understanding of what competitors are doing abroad, how consumption is changing, and what their impacts are likely to be on producer returns and trade in various types and qualities of wines; and a clearer idea of the consequences of various possible exogenous shocks to baseline projections to 2030 of the demand and supply sides of the industry.

The adoption plan at the outset included:  Dissemination of results to wine industry conferences such as Outlook, Environment, and AWITC;  Publication of results in industry journals, using non-technical language;  Standard publication in peer-reviewed economics journals to get professional feedback and ensure quality control; and  Early free provision of all working papers, to be disseminated prior to publication via the websites of the UofA’s School of Economics.

The performance targets at the outset for the 3 years 2008/09 to 2010/11 were at least:  2 industry journal articles,  1 economics journal article,  2 conference presentations,  an updated Global Wine Markets Statistical Compendium, and  possibly a book following a workshop in February 2010.

That is, the performance targets for this project were at least 6 industry journal articles, 3 economics journal article and 6 conference presentations during the three years 2008/09 to 2010/11, and possibly a book. The February 2010 workshop was a great success (90 mostly self-funded attendees, a large minority from overseas), but rather than a book it resulted in a mini-symposium of five articles being published in the journal Economic Papers and a summary paper in a wine industry journal (publications 8, 17, 19, 20, 21 and 22 in Appendix 3).

When the project was extended to 30 September 2014, the book target was amended to include three books/ebooks and accompanying databases. The first is an update and expansion of our Global Wine Markets Statistical Compendium, which was published in late 2011. The second is a book entitled Which Winegrape Varieties are Grown Where? A Global Empirical Picture, which was published in late 2013. The third is an update of our small 1998 book on Trends and Cycles in the Australian Wine Industry. It was scheduled for publication by 30 September 2014. However, as the data gathering proceeded it became clear (see Results section below) that there was scope to do far more than just update that booklet. As a result, the original 80-page book will be replaced later this year with a University of Adelaide Press book several times larger, based on the database of more than 150 tables assembled during the last year of this project.

The project has thus over-delivered on its original commitments by several orders of magnitude, producing over the past six years – and with barely half the originally allocated funds from GWRDC – a total of 9 industry journal articles, 10 economics journal articles, 3 books, 2 chapters in other books, 4 4

large databases, 20 other publications, and almost 40 Powerpoint (and often keynote or plenary) presentations at conferences and workshops in Australia and abroad (see Appendixes 3 and 5).

Method

The best way to assess market prospects is to develop pertinent empirical models of those markets, to calibrate them to the latest year for which the essential data are available, and to project them to a future year of interest. A national (and ideally economywide) model is needed to ensure enough regional detail, while a global model of wine markets (ideally with several wine qualities being identified) is needed so as to include actions and responses in the rest of the world.

A first step was to update and expand our earlier version of that database. Those models were then revised to allow better analysis of now-more-important issues.

Fortunately the PI and his former graduate students, as part of a previous GWRDC-funded project, developed both a regional model of the Australian economy (for analysing the impact of the GST and WET) and a global model of wine markets.4 For the purposes of the present project both models needed enhancements to make them more suitable for the task at hand. The regional Australian model was replaced by a far more detailed one known as TERM (‘The Enormous Regional Model’), while the global model was expanded to include 5 different wine quality types and two different grape types (premium and non-premium).

The state-of-the-art TERM model was built and is maintained by the Centre of Policy Studies, formerly at Monash University and now at Victoria University. Three important features of the TERM model are its regional disaggregation of the Australian economy into Statistical Divisions (which we amended with further disaggregation to approximate all the major wine GIs), its industrial disaggregation of the agricultural sector to separate out the grape and wine industries and their quality-differentiated products, and its explicit inclusion of water as a key natural resource whose use is now able to be priced as the various industries and urban sector compete for its allocations.

Both models also needed updated data. To that end we undertook to update and expand our Global Wine Markets Statistical Compendium, earlier editions of which had been compiled as part of our previous GWRDC research projects (with supplementary funding by WFA, AWBC, ARC and RIRDC). This latest version (publication 12 in Appendix 3) provides new data sections to disaggregate national wine markets by quality and to provide information on consumer and import taxes for all the key markets.

Also needed to project the world’s wine markets to 2030 are assumptions about growth in population, income, etc. for the world’s national economies. By coincidence the PI has been simultaneously engaged in RIRD- and ARC-funded research that draws on World Bank, OECD and ADB baseline business-as-usual projections of such variables, which saved much time in developing realistic scenarios the present project.

Having revised, expanded and updated both models and their required databases, we were ideally placed to undertake a wide range of empirical analyses.

4 Wittwer, G. and Anderson, K. (2002), ‘Impact of the GST and Wine Tax Reform on Australia’s Wine Industry: A CGE Analysis’, Australian Economic Papers 41(1), 69–81; Wittwer, G., Berger, N., and Anderson, K. (2003), ‘A model of the world’s wine markets’, Economic Modelling 20: 487–506. 6

Discussion of results

Some highlights of the results generated by this project are summarized here, with attention focusing on analyses of the following sets of issues: impacts of possible changes to alcohol consumption taxes, regional consequences of shocks, effects on competitiveness of recent and prospective real exchange rate movements, effects of developments in China, the evolving varietal distinctiveness of wine regions in Australia and abroad, R&D’s role in Australia’s wine industry growth, and lessons from history for Australia’s latest wine industry boom-slump cycle.

Alcohol taxation

With alcohol taxes being reviewed ever more closely each year, we held a workshop on the topic in early 2010, out of which five economics papers and one wine industry journal article were published (publications 8, 17, 19, 20, 21 and 22 in Appendix 3). On the assumptions made in this project, a change from the current ad valorem tax to a similar-revenue volumetric tax on domestic wine sales would cause regional GDP to rise in the cool and warm wine regions, but GDP in the hot wine regions would fall substantially. The switch to a volumetric tax as high as the standard beer rate would raise tax revenue and would lower domestic wine demand by more than one-third.5

However, our assumptions lead us to estimate that a change in the taxation rate would induce a one-third decrease in production of non-premium wine, because its consumer price would rise by at least three-quarters (while the average price of super-premium wines would change very little).

Reforms have not yet happened despite the Henry Review of Taxation, but the issue has not gone away and it was a topic of discussion at the Winemakers’ Federation of Australia’s 2014 Outlook Conference at which Anderson presented updated results from publication 25 in Appendix 3. Those new results repeat earlier findings that wine consumers in Australia face taxes far higher than in most other wine-producing countries, especially for premium wines.

If we assume that those taxes are aimed at reducing the social costs of alcohol abuse, they are excessive. However, if a switch from an ad valorem to a volumetric tax was possible without raising the overall level of wine industry taxation, it would be harder to argue that wine was too cheap. More importantly, producers would be encouraged to move more toward higher quality outputs – which is consistent with where the country’s comparative advantage also is moving.

Regional consequences of export demand shocks

In addition to estimating the regional economic effects of possible wine tax reforms, publication 17 in Appendix 3 also focuses on how Australia’s various wine regions would be affected by a decline in export demand. The demand shock considered causes regional GDP to fall in the cool

5 For econometric evidence of the price elasticity of demand for wines, see for example J.J. Fogarty, 'The Demand for Beer, Wine and Spirits: A Survey of the Literature', Journal of Economic Surveys 24(3): 428-478, 2010. See also Fogarty, J.J. and G. Jakeman, 'Wine Tax Reform: The Impact of Introducing a Volumetric Excise Tax for Wine', Australian Economic Review 44(4): 387-403, December 2011.

and warm wine regions, but not in the hot inland wine regions unless the shock is large. As it happens there has been a large decline in the demand for Australian wine abroad during the past few years, at a time of high water prices and extreme weather events, which has contributed to the recent reduction in winegrape vineyards in the inland wine regions.

To undertake these regional analyses we needed to first compile a comprehensive database of regional data (publication 41 in Appendix 3). Because this has become a useful resource to industry participants in its own right, it has since been updated (see final sub-section of this results section) and is included in our new Australian Grape and Wine Industry Database, 1843 to 2013.

Effects on national competitiveness of real exchange rate (RER) developments in 2007-11

During 2007 to 2011, Australia (along with Japan, China and other rapidly emerging East Asian economies) experienced 30-35 percent real exchange rate (RER) appreciations against the US dollar. Other Southern Hemisphere wine exporters (Chile, New Zealand, South Africa) also saw their RERs appreciate, albeit more moderately (by 9-23 percent). By contrast, the British pound depreciated heavily against the USD (by 18 percent), while for other Western European countries – both wine-exporting and wine-importing – their RERs remained close to the USD during that period. Australia thus experienced one of the largest real appreciations among the wine exporters, so its wineries received less AUD for their exports and faced more foreign competition in the domestic market. As for wine-importing countries experiencing a real depreciation, most notably the United Kingdom, wine imports became less affordable.

Using our empirical model of the world’s wine markets, we estimate that the RER changes reduced grape and wine production in the Southern Hemisphere where RERs appreciated, while in the United States and in Europe where RERs changed relatively little, production increased slightly (see publications 5, 15, 28 and 39 in Appendix 3). Since Australia had the largest appreciation of the wine-exporting countries, its winemakers and hence grapegrowers are estimated to have suffered the largest reduction in domestic prices in real local currency terms: wine-grape and commercial-premium wine producer prices were reduced by almost one-eighth, and super premium wine prices by one-fifth due to these RER shocks. Associated with that is a decline in the volume of Australia’s wine production, but given the resistance of producers to downsize in the short term, the actual change is small. Real prices in domestic currency terms are estimated to have declined in the other Southern Hemisphere countries as well, but by less than two-thirds as much as in Australia. Furthermore, real grape and wine prices (again in domestic currency terms) rose in the United States and Western Europe, by between 3 and 6 percent, so output is estimated not to have been reduced at all in those regions as a consequence of RER movements in that 2007-11 period.

The trade consequences of that set of exchange rate shocks also depend on its impact on wine consumption. With lowered prices for both domestic and imported wines, Australian consumption is estimated to have been boosted by 4 percent because of these RER changes – which is very close to the proportional change in actual consumption during that period. This suggests the net effect on domestic consumption of all other influences over the period 2007-11 was close to zero. In Europe’s key wine-exporting countries and in the United States, by contrast, the rise in wine 8

prices would have reduced domestic wine consumption in the absence of other influences. Other influences evidently were not absent, however. In the United States, wine consumption actually rose by 2 percent over that period, perhaps as the economy there began recovering from the global financial crisis by 2011. In Western Europe’s wine-exporting countries, by contrast, it fell by 10 percent, perhaps because those economies were still recovering from the financial crisis in 2011. The 18 percent real depreciation of the UK Pound against the US dollar on its own caused the consumer price of wine in that market to rise such that estimated wine consumption fell 4 percent, which is a little less than the actual decrease over that period of 7 percent. Discrepancies arise when there is a non-trivial net effect of economic changes other than in RERs. For example, China’s rapid income growth and increasing absorption of Western tastes meant that there was a substantial increase in wine demand there between 2007 and 2011, so that observed wine consumption grew by 22 percent over that period despite almost no contribution from RER changes. In the case of nations that went into recession, income deterioration between 2007 and 2011 affected actual consumption markedly. For example, Japan’s actual wine consumption declined 2 percent even though RER changes on their own are estimated to have induced a 10 percent increase.

The negative impact on consumption of the real depreciation in the United Kingdom was bad news for all wine-exporting countries, but the impact was particularly serious for Australia, which was the 2nd most important supplier in volume terms of wine to the UK market after Italy, and 3rd in value terms after France and Italy. The impact on the UK’s import volumes from Australia and other Southern Hemisphere countries were substantial, with annual demand for their wine falling by 64 ML – half of which was borne by Australia. By contrast, the annual sales by the Old World and the US each were estimated to fall by only 2 ML as a consequence of RER movements between 2007 and 2011. Moreover, the modelled reduction in wine consumption in the United States was borne almost entirely by Australian and other Southern Hemisphere producers, whose wines became more expensive than domestically produced or Old World wines in the US market. That set of RER shocks reduced the Southern Hemisphere’s share of US total wine consumption from 21 to 19 percent. The pattern of impact on bilateral wine trades with Canada, Germany and other Western European wine-importing countries was not quite as severe, but in all those cases Australian and other Southern Hemisphere producers lost out to US and Old World suppliers.

In aggregate, RER movements over the 2007-2011 period are estimated to have reduced Australia’s annual wine exports by 64 ML. This is more than half the aggregate loss to all other Southern Hemisphere exporters of 110 ML, and it contrasts with estimated export gains of 193 ML to the United States and 167 ML to Western Europe’s key wine-exporting countries. This reversed somewhat the massive gains of the Southern Hemisphere exporters at the expense of the Old World over the past two decades. It also strengthened the competitiveness of the US wine industry relative to other New World wine producers in both the US and European markets.

Australia is the country whose wine trade was most adversely affected by real currency changes during 2007-11. In addition to losing export sales, however, it has also seen a considerable increase in imports. One-sixth of the estimated extra imports due to currency changes are from New Zealand, because of the greater real appreciation of the AUD compared with the NZD. New Zealand’s extra penetration of the Australian market is especially strong in the super-premium+ category (predominately Sauvignon Blanc and Pinot Noir), while France’s is predominantly in sparkling wine and Italy’s in commercial-premium wines. 9

How do the modelled outcomes compare with observed export changes in Australia? Historic data indicate that between 2006-07 and 2010-11, the volume of Australia’s wine exports fell only slightly, from 798 ML to 727 ML; but, in domestic currency terms, exports dropped from almost AUD2.9 billion to just under AUD2.0 billion over that period. Therefore, the modelled effects of RER changes suggest those RER changes explain all but one-tenth of the actual drop in the volume of wine exports of 71 ML, and all but one-sixth of the actual drop in value. Thus these results go a long way towards explaining why market shares and producer prices have changed so much for New World wine-exporting countries in recent years. In particular, they explain most of the improvement in competitiveness of the US and EU and the decline for Australian and other Southern Hemisphere exporters between 2007 and 2011. This only slightly reverses the upward trend in the Southern Hemisphere’s share of global wine exports over the previous 15 years though, and does not necessarily mean that previous trend won’t return.

Effects on competitiveness of prospective real exchange rate developments

RER changes can of course reverse, and indeed the AUD has depreciated considerably in the past 18 months. To examine how much a reversal of RER trends would affect Australian and other wine exporters’ international competitiveness, we again used our empirical model of the world’s wine markets (see publications 2, 15 and 28 in Appendix 3). Specifically, we projected markets from 2011 to 2018, drawing on our experience in projecting global markets for all products,6 under two different RER scenarios: that RERs over that period either (a) remain at their 2011 levels or (b) change by 2018 to RERs halfway between the 2009 and 2011 RERs, effective as of 2013.7

Over that period to 2018, Australia’s non-premium grape and wine prices are projected to fall further if RERs did not change from their 2011 levels, while super-premium and iconic still wine prices would rise by more than 40 percent. If, on the other hand, RERs were to return by 2018 half-way toward what they were in 2009, real prices in Australia in local currency terms would rise above 2011 levels for most grape and wine types, especially for super-premium+ wines. The extent of those rises would be somewhat but not substantially less if China’s import growth were to slow (see next sub-section below). Even if there were no changes in exchange rates, Australia is projected to expand its output by 2018 for all wine types except non-premium. For commercial- premium and super-premium, the increases are 8 percent and 15 percent. However, with the reversal in RER trends, those output increases would be 13 and 18 percent, respectively. Were there also to be a devaluation of Southern Hemisphere exchange rates, output in that region would expand even more while output expansion in the Northern Hemisphere would be slightly less.

Assumed income, population and preference changes together mean that consumption volumes grow over the period to 2018 for all but non-premium wine, but least so for commercial-premium.

6 See, for example, Anderson, K. and A. Strutt, “Emerging Economies, Productivity Growth, and Trade with Resource- Rich Economies by 2030”, Australian Journal of Agricultural and Resource Economics Vol. 58, 2014 (forthcoming); “Growth in Densely Populated Asia: Implications for Primary Product Exporters”, Asia and the Pacific Policy Studies 1(1): 112-26, January 2014; and “The Changing Geography of World Trade: Projections to 2030”, Journal of Asian Economics 23(4): 303-23, August 2012. 7 Except for China and India, whose currencies were assumed to appreciate a further 2 percent per year over this projection period from 2011 because of their assumed strong economic growth. 10

The percentage increases are very similar in both scenarios for the Old World and Japan, but are somewhat more in the United Kingdom, China and especially the United States in the altered currencies scenario versus the scenario with no changes in RERs. What is striking is the concentration of consumption growth and declines: in all scenarios the growth is concentrated in the US, Brazil and especially China, while there are substantial declines in consumption in the Old World (mostly of non-premium wines). When combined with the changes projected in production, world trade grows 6 percent in the base scenario, and 7 percent in the alternative scenario in which RERs change. Virtually all of that increase in those two scenarios is due to China’s import growth. In terms of the real value of global trade, the upgrading of demand elsewhere means that China accounts for around two-fifths of the global wine import growth. In both scenarios the value of global wine trade rises by about one-sixth.

In terms of competition in Australia’s domestic market, the share of sales supplied from abroad is projected not to change if there is no change to RERs, but to fall by two percentage points in both value and volume terms in the alternative scenario in which exchange rates change to an RER at the midpoint between the 2009 and 2011 RERs.

These results are not surprising given the earlier results showing that RER changes over the period 2007-11 altered substantially the global wine export shares of the Old World and USA versus the Southern Hemisphere’s New World exporters and especially Australia.8 They suggest exchange rate movements are capable of playing a major role in the years ahead, just as they have in the past. Of course these projections are not predictions. Actual exchange rate changes, and the ability of Australian wine producers (as compared with their competitors abroad) to capture the projected market growth opportunities in Asia and elsewhere, will determine the changes in market shares over the coming years. Not all segments of the industry are projected to benefit, with non-premium producers facing falling prices if demand for their product continues to dwindle as projected above. But at least the above results can alert producers to possibilities, given the range of assumptions built into our model of global wine markets.

Effects of developments in China

China remains the market in which wine exporters anticipate the highest rate of import growth in the future. China’s RMB appreciated in real terms more than most major currencies between 2007 and 2011, the effect of which in isolation would be for China to increase its share of global wine consumption and imports. Real local currency prices of wine in China were barely affected by observed RER movements between 2007 and 2011. Thus income rises ensured increased imports of wine from all sources, with more from the New World (15 ML including the USA) than from the Old World (7 ML), according to our model of the world’s wine markets (see publications 2, 4, 26 and 28 in Appendix 3). Those imports substituted for domestic wine, whose consumption was

8 Had we analysed the effect of changes in real exchange rates over the dozen years to 2000, we would have predicted a dramatic growth in Australian wine exports because over that period Australia’s currency depreciated in real terms by almost 30 percent. In fact the volume and USD value of Australia’s wine exports grew 16 and 18 percent per year, respectively, over that period. An analysis of the effects of US dollar appreciation at the turn of the century was undertaken in a previous GWRDC research project. See Anderson, K. and G. Wittwer, ‘US Dollar Appreciation and the Spread of Pierce’s Disease: Effects on the World’s Wine Markets’, Australian and New Zealand Wine Industry Journal 16(2): 70-75, March/April 2001. 11

discouraged by the real appreciation: estimated consumption of domestic wine is 24 ML less than it would have been without those RER changes, and imports 24 ML greater.

China has already become by far the most important wine-consuming country in Asia. With a projected extra 620-940 ML to be added by 2018 to its consumption of 1630 ML in 2011, that dominance will become even greater, according to our modelling. Since China’s domestic production is projected to increase by ‘only’ about 210-290 ML by 2018, its net imports are projected to rise by between 330 and 740 ML. The Southern Hemisphere is projected to supply a little more than half of those extra imports in the base scenario, and a little less than half in the alternative scenarios. The United States reduces its imports by 24 ML and expands its exports to China by 50 ML in the base scenario, but in the alternative RER scenario it increases its imports of premium wines.

The projections to 2018 reveal an even more striking prospect, however. It has to do with the continuing growth of China’s net imports. Australia is projected to supply between 65 and 150 ML of China’s extra imports, amounting to between USD350m and 650m per year. That represents about one-fifth of China’s total import volume increase and, more importantly, between 22 and 30 percent of the value of China’s extra imports.

What about Australia’s exports to other countries? Again it depends very much on the scenario. If RERs did not change from 2011 to 2018, Australia’s exports to all destinations other than Asia are projected to decline, and in aggregate volume would be no more than in 2011. By contrast, if exchange rates were to settle at half-way back to those of 2009, Australian total annual exports would increase by 90 ML to become about one-eighth more than in 2011. (In a scenario involving slower import growth by China, that increase is only two-thirds as large.) The impact of the scenario on the USD value of total exports from Australia is much greater though, ranging from 20 percent to 50 percent over 2011 values.

There is little joy for Australian producers of non-premium wines (and thus grapes) in these projections, however: their exports are expected to fall. This is partly because only a fraction (between one- and two-fifths) of the increased volume of imports by China is projected to be non- premium wines. For Australia those fractions are similar: between 25 percent and 42 percent of the projected increase in volume of its wine exports to China – and much less of the value of those sales – is non-premium.

China’s share of Australia’s total value of wine exports is projected to grow from 6 percent in 2009 to between 20 and 28 percent by 2018, depending on how rapidly China’s aggregate wine imports grow. The UK share, by contrast, is projected to stay flat or fall by 2 percentage points so as to be well below China’s by 2018. Even the US share barely recovers from its low 2012 level and falls below China’s if China keeps growing rapidly.

The above projections point to the enormous speed with which China could become a dominant market for Australian wine producers. While the recent and projected rates of increase in per capita wine consumption in China are no faster than what occurred in several Western European wine-importing countries in earlier decades, it is the sheer size of China’s population – and the fact that grape wine still accounts for only 4 percent of Chinese alcohol consumption – that makes this import growth opportunity unprecedented. It would be somewhat less if China’s own wine- 12

grape production increases faster, but certainly in as short a period as the next five years that is not likely to reduce the growth in China’s wine imports very much, especially at the premium end of the spectrum.

Evolving varietal distinctiveness in the world’s and Australia’s wine regions

Globalization of the world’s wine markets over the past two to three decades has added to both opportunities and competitive challenges for producers seeking to differentiate their product to attract the attention of discerning consumers. The traditional practice in the Old World of displaying regional names on wine bottle labels is increasingly being supplemented by grape varietal names. The commercial success of varietal labelling, especially for lower-priced New World wines, has led to some freeing up of labelling laws in the European Union to allow that practice. Meanwhile, producers in Australia are realizing the marketing value of following Europe’s traditional producers in going beyond country of origin to regional and sub-regional labelling so as better differentiate their product.

In addition to striving to product-differentiate, producers are also well aware of the impact climate change is having on their winegrapes. Adaptation strategies include switching to warmer- climate or more-resilient grape varieties, and re-locating to regions at higher latitude or altitude so as to be able to retain the firm’s current mix of grape varieties. Numerous regions in Australia are still trying to identify their varietal comparative advantages, and winegrowers are continually on the lookout for attractive alternative varieties that do well in climates similar to what they expect theirs to become in the decades ahead. Moreover, the biotechnology revolution is providing new opportunities for breeders, which is increasing their interest in exploring traits of little-known varieties.

Also of concern is that the diversity of winegrapes is narrowing to a few ‘international’ varieties. A small but growing group of producers are exploring alternatives to the dominant varieties. Such biodiversity concerns, together with the above marketing and climate adaptation needs, are generating a rapidly growing demand for information on which winegrape varieties are grown in the world’s various wine regions. Wine atlases such as Johnson and Robinson’s World Atlas of Wine provide a great deal of information about where winegrapes are grown, and the 2012 Wine Grapes book Robinson, Harding and Vouillamoz draw on the latest DNA research to provide a detailed guide to the world’s commercially grown ‘prime’ varieties and their various synonyms. However, neither of those seminal books, nor any other wine atlas or wine encyclopaedia, provides comprehensive global data on the bearing areas of winegrapes by region and variety. To fill this lacuna, we compiled such a global database and provide several indicators to capture changes over the first decade of this century in the varietal mix of the world’s wine regions.

Specifically, we have assembled data on the hectares grown of various winegrape varieties in the various regions of the world. This new database involves more than 640 regions in 48 countries that produce 99% of the world’s wine, and over 1500 prime winegrape varieties plus more than 800 synonyms. The database is now freely available at www.adelaide.edu.au/wine- econ/databases/winegrapes, and our 700 page e-book is freely downloadable at www.adelaide.edu.au/press/titles/winegrapes. In the first fortnight the e-book was downloaded around 8000 times. A series of articles on the implications of these data for the 13

Australian wine industry have begun to be generated (see, e.g., publications 3, 14 and 18 in Appendix 3). The book shared with two others the 2014 OIV Prize from the Organisation Internationale de la Vigne et du Vin for the best viticulture books published in 2013.

The extent to which the mix of winegrape varieties in Australia differs from the rest of the world and differs across wine regions within the country, and how that picture has altered over the first decade of this century, is examined in a recent conference paper.9 It reveals that the varietal distinctiveness of Australia vis-à-vis the rest of the world, and varietal differentiation between regions within the country, are far less than for other countries – a pattern that has become even more pronounced since 2000. It concludes that there is much scope for Australia’s winegrape plantings to become more diversified as producers respond to market and climate changes. Even the more-detailed 2012 data for South Australia, which include not-yet-bearing new plantings, reveal that well under 2 percent of the vineyard area is devoted to so-called emerging or alternative varieties.

R&D’s role in Australia’s wine industry growth

Researchers at the University of Piedmont have been exploring the contribution of innovation to wine industry developments in different countries. They asked Anderson to contribute an Australian case study chapter to their edited volume (publication 13 in Appendix 3). It resulted in the inclusion of a new table showing that the national contribution of English-language research publications per litre of wine produced is still relatively high for Australia. However, it is now considerably lower than is often loosely claimed by Australia’s wine research community, at least before any adjustment for the quality of publications. One reason for that is the dramatic growth in Australia’s wine output, which evidently has not been fully matched by growth in the number of Australian research publications. The country’s comparative position would be even lower if continental European language publications were included.

This apparent slippage in Australia’s comparative position as a grape and wine knowledge creator is not inconsistent with the decline in Australia’s overall agricultural R&D investment per dollar of output.10 The current challenge for industry leaders is to encourage producers to agree to increase the proportion of their earnings levied for R&D, even if the government is unwilling to raise its dollar-for-dollar matching threshold. The fact that benefit-cost ratios from such investments very high helps to sell the message, and the task will be easier as and when producer returns rise with the AUD’s real depreciation.

9 Anderson, K., “Evolving Varietal and Quality Distinctiveness of Australia’s Wine Regions”, presented at the AARES Annual Conference, Port Macquarie, 4-7 February 2014. A revised version has been submitted to a journal, but as it is not yet published it is not listed in Appendix 3. 10 Agricultural Science and Technology Indicators, ASTI Database, Washington, D.C.: International Food Policy Research Institute. http://www.asti.cgiar.org/data

Australia’s latest wine industry cycle in historical perspective

Australia’s wine industry currently is at the bottom of its latest cycle – its fifth since 1850. At the 2014 biennial Wine Outlook Conference (1-2 October, Adelaide) it was revealed that barely one in six producers were making profits. A key question is: how, and when, might producers be able to earn sustainable profits again? Answering that question requires examining the anatomy of this latest cycle, which began in the late 1980s, and the differences as well as similarities between the current and previous cycles. A key feature is the strong export focus of the latest expansion, at a time of rapid globalisation of many industries.

For nearly two decades the stars were favourably aligned for Australian producers before they suddenly became badly misaligned (see publications 6, 28, 34, 38 and 39 in Appendix 3). One major element of the boom and then the crisis was the pattern of movements in real exchange rates. As outlined above, it helps explain the differing phases since the mid-1980s of the Australian industry’s competitiveness relative to other wine-exporting countries. The other major shock to the world economy that impacted non-trivially on the wine industry in all major wine-producing countries in recent years was the global financial crisis, which led to a temporary decline in the quantity and quality of wine demanded in traditional markets.

Grapegrowers and winemakers in both the Old World and the New World are far more exposed to such shocks to the world economy now than they were in the 20th century. This is partly because of the move by most countries to flexible exchange rates since the 1980s, and also because the wine industry has become more globalised in the past two decades than ever before in its long history. The share of global wine production exported more than doubled between 1989 and 2009, rising from 15 percent (which was already above its peak in the first globalisation wave a century before) to 32 percent; and it reached 41 percent in 2012. For the four biggest European wine-exporting countries, their export propensity rose over the two decades to 2009 from 20 to 35 percent, while for New World exporters it rose even more dramatically, from just 4 percent to 37 percent. By 2012, those shares of production exported had reached 49 and 42 percent, respectively, according to the OIV.

The extent of exposure to global shocks varies across countries according to not only the share of their production that is exported, but also the extent to which their domestic wine markets are open to imports. The growth in two-way trade in wine has been pervasive over the past three decades. In 2012, the share of Australian wine production volume that was exported was 64 percent, and 16 percent of its domestic sales volume was supplied by imports – up from just 2 and 3 percent, respectively, in 1980-84. In value terms the share of imports in domestic sales in Australia is even higher, at around one-quarter. Moreover, it is not only winemakers who are vulnerable to exchange rate and other shocks to the market: even though wine-grapes themselves are not often traded internationally, their prices soon adjust when wine price prospects alter.

The dramatic growth in Australia’s wine exports since the mid-1980s was stimulated by a low AUD. In US dollar (USD) terms, the AUD hovered between 0.60 and 0.80 from 1983 to 1999, and then it fell to slightly below 0.50 in 2001 before returning to 0.80 by the beginning of 2007. If investors expected those low rates to continue, that would have encouraged more plantings than subsequent exchange rate movements warranted. Since then, however, the AUD rose to a peak of USD1.10 in 2011, and it remained in the 0.98 to 1.08 range for the 18 months to May 2013. Only a 15

year later did it begin to fall towards and slightly below 0.90. Similar paths have been traced by the AUD exchange rate with UK pound (GBP) since 1985 and the Euro (EUR) since 2007. As a consequence of those and other bilateral exchange rate movements, Australia has lost global market share to other wine exporters. Since 2007, the gap between the USD value of Australia’s wine exports and that of the smaller New World exporters has halved, while the share of the country’s domestic consumption supplied by imports has more than doubled (see two previous parts of this Results section).

The enthusiasm of new investors in the wine industry may have also resulted from a lack of readily available data and analysis of past trends and cycles in the wine industry’s development in Australia (and other countries). To reduce that risk we assembled data and prepared a brief report in 1998 on past trends and cycles, as part of an earlier GWRDC project.11 Many copies of that booklet were distributed, and perhaps without it even more hectares would have been planted. With that latest boom behind us, now is an appropriate time to update that book.

As we proceeded with that update of our historical database of Australian wine industry development, we realized there would be value in expanding the task in three dimensions. One was to also incorporate the data described above on Australia’s wine regions (publication 41 in Appendix 3), so we have endeavoured to update those detailed data too where possible. But more than that, we have assembled as much data as possible by State/colony back to the 1840s, so it is now possible to trace developments in the separate colonies during the 19th century and then into the 20th century as the Australian Federation formed and barriers to trade between states were abolished after 1900.

Secondly, having assembled a unique database on evolving winegrape varietal mixes of plantings in the various regions of the world (publication 11 in Appendix 3), it made sense to include that regional information in the Australian database. Enquiries with the Winefacts team at Wine Australia revealed that data on varieties by region were available from various sources back to 1956, so they have been incorporated too. Those new data provide a sense of how rapidly the mix of varieties can change over time.

Thirdly, economic historians have come to realize that doing empirical research on one country’s developments can be greatly enriched by comparing them with developments in other similar countries over the same time period.12 This is especially rewarding for periods of intense globalization, since those countries are all exposed to the same changes in international markets. In the case of the wine industry, for example, the latter 19th century involved not only the world’s first globalization wave but also the highly disruptive effect of the phylloxera outbreak in Europe and elsewhere. There are always unique forces at work in each country as well as common international forces of course. Examples pertinent to Australia include the discovery-driven mining booms (the 19th century discoveries of copper in South Australia and gold in Victoria and Western Australia, and more recently of iron ore in the Pilbara, oil in Bass Strait, gas off the north-west coast and coal-seam gas near the east coast). Even the rise in mineral and energy prices in

11 Osmond, R. and K. Anderson (1998), Trends and Cycles in the Australian Wine Industry, 1850 to 2000, Adelaide: Centre for International Economic Studies. http://www.adelaide.edu.au/wine- econ/papers/Aust_Wine_Trends_and_Cycles_1998.pdf 12 Hatton, T.J., K.H. O’Rourke and J.G. Williamson (eds.) (2007), ‘Introduction’, pp. 1-14 in The New Comparative Economic History, Cambridge MA: MIT Press. 16

international markets over the past decade or so, which affects all countries, has different effects on national economies. Those effects depend on whether a country is a net exporter or importer of those products – and so whether its international terms of trade improve or worsen – and to what extent it has the resources to exploit at those higher prices to lead to a demand-driven mining boom as in Australia this 21st century.

The IT revolution has ensured that ever-more historical data are being assembled electronically and made freely available to researchers. A Spanish researcher who has published on historical wine trade agreed recently to share his painstakingly compiled data,13 and we have begun to fill in gaps and extend his series. This opens up the possibility of revising our Global Wine Markets Statistical Compendium by not only updating it from 2009 to 2013 but also backdating it from a starting year of 1961 to 120 years earlier. That would hugely expand the opportunities to do collaborative comparative research on the extent, causes and effects of Australia’s (and other countries’) wine industry booms and busts.

Meanwhile, we have completed the revision, update, backdate and massive expansion of our database on trends and cycles in Australia’s wine industry, and are now in a position to generate charts and expand the text of our 1998 booklet so that a new book and online e-book can be published by the University of Adelaide Press before Christmas 2014. The text of that book will lay out key features of the trends and cycles in the development of the industry, drawing the reader’s attention to the indicators of those developments and to the main drivers of them as revealed in the many charts and tables that make up the bulk of its several hundred pages. It leaves open for further research the much more challenging but also more rewarding task of explaining econometrically those rates of growth and turning points in the industry’s development over the past 170 years, and drawing lessons for current and future investors.

Conclusions and recommendations

The six years of this project have been tumultuous ones for the Australian wine industry. The causes are now well understood, and appropriate responses and adjustments are gradually appearing even though it may take some time for producers to get back to normal profit levels. The latter will depend heavily on how far and how fast the Australian dollar depreciates as the mining boom moves from its investment stage to its production and export stage. That latter stage is projected to continue for the foreseeable future as China continues to industrialize, however. So even though income growth in China is expected to be good news for wine-exporting countries such as Australia, it is better news for our competitor wine-exporting countries that do not have a large mining sector and hence are not dealing with a mining-strengthened currency.

While wine consumers in Australia continue to face taxes far higher than in most other wine- producing countries, that is less so for non-premium wines. If a switch from an ad valorem to a volumetric tax was possible without raising the overall level of wine industry taxation, the

13 Pinilla, V. (2014), ‘Wine Historical Statistics: A Quantitative Approach to its Consumption, Production and Trade, 1840-1938’, AAWE Working Paper No. 167, July. http://www.wine-economics.org/list-of-aawe-working-papers/

argument that wine was too cheap would be more difficult to sustain. More importantly, producers would be encouraged to move more toward higher-quality outputs – which is consistent with where the country’s comparative advantage also is moving.

However, any such reform would harm the producers of non-premium winegrapes and wine and hence the inland irrigated regions. Furthermore, agreeing to such a change exposes the industry to the risk of a rise in the overall level of wine industry taxation, perhaps to match the much higher rate per unit of alcohol that is imposed on beer (if not the even higher rate on spirits).

Exchange rate movements are capable of having a major influence on wine industry profits in the years ahead, just as they have in the past. Changes in preferences also play a key role. With most markets moving away from non-premium to finer wine consumption, including in China, producers at that low end of the quality spectrum will struggle. If real exchange rates were to return by 2018 half-way toward what they were in 2009, real prices in Australia in local currency terms would rise above 2011 levels for commercial-premium and super-premium wines, by about one-seventh and one-sixth, respectively. The extent of those rises would be somewhat but not substantially less if China’s import growth were to slow. In terms of competition in Australia’s domestic market, the share of sales supplied from abroad is projected to fall by about two percentage points in both value and volume terms in the alternative scenario in which exchange rates remain at roughly the rates as of late-September 2014.

China’s share of Australia’s total value of wine exports is projected to grow from 6 percent in 2009 to around one-quarter over the next five years. The UK share, by contrast, is projected to stay flat. This vindicates the increasing attention that both generic and brand marketers are giving to China (along with the more lucrative US market). With that attention appropriately focused on premium+ wines, Australian producers of non-premium grapes can expect profits from exports of their product to remain low at best.

Some commentators are sceptical that China’s import demand could grow so quickly, and indeed exports may not accelerate if enough marketers fail to increase their presence there or if China’s own wine-grape production increases faster than currently expected. But the recent and projected rates of increase in per capita wine consumption in China are no faster than what occurred in several Western European wine-importing countries in the 1990s. What is different about China is the sheer size of its population, and the fact that grape wine still accounts for less than 5 percent of Chinese alcohol consumption.

In an ever-more-competitive global market, vignerons continually compete for the attention of consumers by trying to differentiate their product while also responding to technological advances, climate changes and evolving demand patterns. In doing so, they are increasingly highlighting their regional and varietal distinctiveness. Our examination of the extent to which the mix of winegrape varieties in Australia differs from the rest of the world and differs across wine regions within the country suggests that the varietal distinctiveness of Australia vis-à-vis the rest of the world, and varietal differentiation between regions within the country, are far less than for other countries. This pattern has become even more pronounced since 2000. There is therefore much scope for Australia’s winegrape plantings to become more diversified as producers respond to market, technology and climate changes.

Producer profitability has the potential to be raised by investing more in R&D of course. One index of the extent of Australia’s investment in research activities is the national contribution of English- language research publications per litre of wine produced. That is still relatively high for Australia, but it is now quite a bit lower than in previous decades, and would be even lower if continental European language publications were included. The challenge for industry leaders is to encourage producers to agree to increase the proportion of their earnings levied for R&D, even if the government is unwilling to raise its dollar-for-dollar matching threshold. The fact that benefit-cost ratios from such investments are very high helps to sell the message, and the task should become easier as and when producer returns rise with the AUD’s real depreciation.

The final stage of the present research project, involving the compilation of historical data on the industry’s booms and busts, has opened up a new area for empirical research that has the potential to provide lessons from the past about the cyclical nature of this industry’s development and the ways it is similar to or different from wine industry developments in other countries.

Appendix 1: Communication

Dissemination of results from this project have included discussions with wine industry bodies such as GWRDC, WFA, Wine Australia and WGGA; presentations at wine industry conferences such as Outlook, Environment, and AWITC; publication of results in wine industry journals, using non- technical language; standard publication in peer-reviewed economics journals to get professional feedback and ensure quality control; and early free provision of all Working Papers, Wine Briefs and datasets, disseminated via the website of the newly established Wine Economics Research Centre of the University of Adelaide’s School of Economics (www.adelaide.edu.au/wine-econ). Media releases have been used from time to time to announce significant new uploads.

As shown in Appendix 3, we have published 10 articles in wine industry journals, 3 books and e-books, 2 chapters in other books, 11 economics journal articles, and 19 other wine economics publications. In addition, we have presented 40 Powerpoint (and often keynote or plenary) presentations at conferences and workshops in Australia and abroad.

The project also has generated 4 huge datasets (see Appendix 5) that have been made freely available in Excel at www.adelaide.edu.au/wine-econ/databases so as to encourage their use by industry participants and other stakeholders, as well as by other analysts.

Appendix 2: Intellectual property

Virtually all of the outputs from this project have been put in the public domain and made freely available via the internet. This includes the 3 e-books and 4 large Excel databases listed in Appendixes 3 and 5 below. The models used in modelling the Australian economy and the world’s wine markets also are available on request from their creator, Professor Glyn Wittwer, Centre of Policy Studies, Victoria University ([email protected]). 21

Appendix 3: List of project publications and conference PPT presentations (in reverse chronological order)

Wine industry journal articles

1. Anderson, Kym (with the assistance of N.R. Aryal), “Excise Taxes on Wines, Beers and Spirits: An Updated International Comparison”, presented at the 2014 Wine Outlook Conference, Adelaide, 1-2 October 2014. Wine and Viticulture Journal 29(6): 66-71, November/December 2014. Also published at www.observatoriova.com/2014/11/impuestos-internos-sobre-vinos-cervezas-y- espirituosas-una-comparacion-internacional and circulated as Working Paper 0214, Wine Economics Research Centre, Adelaide, September 2014, and as Working Paper No. 170, American Association of Wine Economists, October 2014.

2. Anderson, Kym, “The Cradle of Wine Looking to Rock the Export Scene”, Australian and New Zealand Grapegrower and Winemaker 603: 12-14, April 2014. Also circulated as Wine Brief No. 4, Wine Economics Research Centre, Adelaide, October 2012.

3. Anderson, Kym and Glyn Wittwer, “How Much Will Exchange Rates Affect Wine Export Prospects?”, Australian and New Zealand Grapegrower and Winemaker 602: 16-17, March 2014. Also circulated as Wine Brief No. 9, Wine Economics Research Centre, Adelaide, December 2013.

4. Anderson, Kym and Nanda Aryal, “Where in the World are Various Winegrape Varieties Grown? Evidence From a New Database”, OIV Bulletin 86(994): 461-84, December 2013. Also circulated as Wine Economics Research Centre Working Paper 0213, December 2013.

5. Anderson, Kym and Glyn Wittwer, “How Large Could Australia’s Wine Exports to China be by 2018?”, Wine and Viticulture Journal 28(6): 60-64, November/December 2013. Also circulated as Wine Brief No. 7, Wine Economics Research Centre, Adelaide, October 2013.

6. Anderson, Kym and Glyn Wittwer, “How Much Have Exchange Rate Movements Reduced Competitiveness of Australian Wines?” Australian and New Zealand Grapegrower and Winemaker 590: 73-76, March 2013. Also circulated as Wine Brief No. 6, Wine Economics Research Centre, Adelaide, December 2012.

7. Anderson, Kym (with K. Arbuckle), “Australia’s Place in Global Wine Industry: Wine Landscape Changed Forever”, Australian and New Zealand Grapegrower and Winemaker 571: 69-71, August 2011.

8. Anderson, Kym and Signe Nelgen, “How Does Australia Rank in the Various Quality Segments of the World’s Wine Markets?”, Wine and Viticulture Journal 26(2): 64-65, March/April 2011. Also circulated as Wine Brief No. 3, Wine Economics Research Centre, Adelaide, March 2011.

9. Anderson, Kym, “Making the Most of Wine Tax Reform”, Wine and Viticulture Journal 25(5): 7- 8, September/October 2010. Also circulated as Wine Brief No. 2, Wine Economics Research Centre, Adelaide, September 2010. 22

10. Anderson, Kym and Christopher Findlay, “Change and Adaptation in the Wine Industry”, The Australian and New Zealand Wine Industry Journal 23(4): 57-58, July/August 2008.

Books

11. Anderson, Kym (with the assistance of N.R. Aryal), Growth and Cycles in Australia’s Wine Industry: A Statistical Compendium, 1843 to 2013, Adelaide: University of Adelaide Press, 2015. Also to be available in PDF form as a free e-book at www.adelaide.edu.au/press/titles/austwine

12. Anderson, Kym (with the assistance of N.R. Aryal), Which Winegrape Varieties are Grown Where? A Global Empirical Picture, Adelaide: University of Adelaide Press, 2013. Also available in PDF form as a free e-book at www.adelaide.edu.au/press/titles/winegrapes

13. Anderson, Kym and Signe Nelgen, Global Wine Markets, 1961 to 2009: A Statistical Compendium, Adelaide: University of Adelaide Press, 2011. Also available in PDF form as a free e- book at www.adelaide.edu.au/press/titles/global-wine

Other book chapters

14. Anderson, Kym “Agricultural Trade Consequences of Asia’s Economic Growth: A Case Study of Wine”, Ch. 4 (pp. 43-65) in Trade, Development, and Political Economy in East Asia: Essays in Honour of Hal Hill, edited by P. Athukorala, A.A. Patunru and B. Resosudarmo, Singapore: Institute of Southeast Asian Studies, 2014. Also circulated as Wine Economics Research Centre Working Paper 0114, June 2014.

15. Anderson, Kym “Contributions of the Innovation System to Australia’s Wine Industry Growth”, Ch. 4 (pp. 70-91) in Innovation and Technological Catch-Up: The Changing Geography of Wine Production, edited by E. Giuliani, A. Morrison and R. Rabellotti, London: Edward Elgar, 2011. Also circulated as Wine Economics Research Centre Working Paper 0310, February 2010.

Academic journal articles

16. Anderson, Kym, “Evolving Varietal Distinctiveness of the World’s Wine Regions: Evidence from a New Global Database”, Journal of Wine Economics 9(3): 249-72, 2014

17. Anderson, Kym and Nanda Aryal, “Where in the World are Various Winegrape Varieties Grown? Evidence From a New Database”, OIV Bulletin 86(994): 461-84, December 2013. Also circulated as Wine Economics Research Centre Working Paper 0213, December 2013.

18. Anderson, Kym and Glyn Wittwer, “Modeling Global Wine Markets to 2018: Exchange Rates, Taste Changes, and China’s Import Growth”, Journal of Wine Economics 8(2): 131-58, 2013.

19. Anderson, Kym, “Is Georgia the Next ‘New’ Wine-Exporting Country?” Journal of Wine Economics 8(1): 1-28, Spring 2013. A longer version is circulated as Wine Economics Research Centre Working Paper 0112, June 2012.

20. Anderson, Kym, Ernesto Valenzuela and Glyn Wittwer, “Wine Export Demand Shocks and Wine Tax Reform in Australia: Regional Consequences using an Economy-Wide Approach”, Economic Papers 30(3): 386-99, September 2011. Also circulated as Wine Economics Research Centre Working Paper 0210, February 2010.

21. Anderson, Kym, “Varietal Intensities and Similarities of the World’s Wine Regions”, Journal of Wine Economics 5(2): 270-309, Winter 2010. Also circulated as Wine Economics Research Centre Working Paper 0410, March 2010.

22. Anderson, Kym, “Reforming Taxes on Wine and Other Alcoholic Beverage Consumption”, Economic Papers 29(2): 197-99, June 2010. Also circulated as Wine Economics Research Centre Working Paper 0810, May 2010.

23. Srivastava, Preety and Zhao Xueyan, “What Do the Bingers Drink? Micro-unit Evidence on Negative Externalities and Drinker Characteristics of Alcohol Consumption by Beverage Types”, Economic Papers 29(2): 229-50, June 2010. Also circulated as Wine Economics Research Centre Working Paper 0710, April 2010. 24. Freebairn, John, “Special Taxation of Alcoholic Beverages to Correct Market Failures”, April 2010. Published in Economic Papers 29(2): 200-14, June 2010. Also circulated as Wine Economics Research Centre Working Paper 0610, April 2010.

25. Anderson, Kym, “Excise and Import Taxes on Wine vs Beer and Spirits: An International Comparison”, Economic Papers 29(2): 215-28, June 2010. Also circulated as Wine Economics Research Centre Working Paper 0510, March 2010.

26. Anderson, Kym, “Terroir Rising? Varietal and Quality Distinctiveness of Australia’s Wine Regions”, Enometrica 2(1): 9-27, March 2009.

Other wine economics publications

27. Anderson, Kym, “Economics and Wine” and “Globalization”, in The Oxford Companion to Wine, 4th edition, edited by J. Robinson, London and New York: Oxford University Press, 2015 (forthcoming).

28. Anderson, Kym, “Agricultural Trade Consequences of Asia’s Economic Growth: A Case Study of Wine”, Working Paper 0114, Wine Economics Research Centre, Adelaide, June 2014. To be published in an edited book by the Institute for Southeast Asian Studies, Singapore.

29. Anderson, Kym, “Pass the Shiraz: Variety the Spice of Life for Australian Wine Growers”, The Conversation, 27 January 2014 at http://theconversation.com/pass-the-shiraz-variety-the-spice- of-life-for-australian-wine-growers-21841 24

30. Anderson, Kym and Glyn Wittwer, “A Global Macroeconomic Perspective on Australia’s Wine Industry”, Ch.1 (pp. 7-17) in the Proceedings of the 15th Australian Wine Industry Technical Conference, eds. R.J. Blair and D. Johnson, Adelaide: Australian Wine Research Institute, 2014 (in printed form and CD-ROM). Also circulated as Working Paper 0113, Wine Economics Research Centre, Adelaide, August 2013.

31. Anderson, Kym, “Book Review of Hugh Johnson and Jancis Robinson: The World Atlas of Wine, 7th Edition”, Journal of Wine Economics 8(3): 359-60, 2013. Also circulated as Wine Brief No. 8, Wine Economics Research Centre, Adelaide, November 2013.

32. Anderson, Kym and Nanda R. Aryal, Database of Regional, National and Global Winegrape Bearing Areas by Variety, 2000 and 2010, freely available at the Wine Economics Research Centre in Excel and PDF files since December 2013 at www.adelaide.edu.au/wine- econ/databases/winegrapes. Also available as a free e-book at www.adelaide.edu.au/press/titles/winegrapes.

33. Anderson, Kym, “Rural Development in Georgia: What Role for Wine Export Growth?”, Working Paper 0112, Wine Economics Research Centre, Adelaide, June 2012. Background paper for a World Bank Country Economic Memorandum (CEM) on Georgia Rising: Sustaining Rapid Economic Growth, World Bank, Washington DC, July 2013, following presentations at the America-Georgia Business Council 14th Annual Conference, Tbisili, 23-25 October 2011, a World Bank Seminar, Tbilisi, 9 March 2012 and the AAWE-ICABR Workshop on Technology and Innovation in the Wine Industry, Feudi di San Gregoria Winery, Italy, 24 June 2012. A summary is published as “Appendix B: Wine Exports and Rural Development”, pp. 79-84 of the CEM.

34. Anderson, Kym, “Book Review of WINE GRAPES: A Complete Guide to 1,368 Vine Varieties, including their Origins and Flavours”, Journal of Wine Economics 8(1): 106-109, Spring 2013. Also circulated as Wine Brief No. 5, Wine Economics Research Centre, Adelaide, November 2012.

35. Jefford, Andrew, “Wine and Astonishment”, The World of Fine Wine 36: 110-119, July 2012. Also circulated as Wine Economics Research Centre Working Paper 0212, June 2012.

36. Anderson, Kym and Signe Nelgen, Global Wine Markets, 1961 to 2009: A Statistical Compendium, database freely available in Excel and PDF files since March 2011 at www.adelaide.edu.au/wine-econ/databases/GWM/. Also available in PDF form as a free e-book at www.adelaide.edu.au/press/titles/global-wine

37. Anderson, Kym, Tony Battaglene, Peter Hayes and Sakkie Pretorius, “Where Art and Science Meet: Constructing a Better Future for the Wine Sector”, Paper presented at the OIV 34th World Congress of Vine and Wine, Porto, Portugal, 20-27 June 2011.

38. Anderson, Kym, and Signe Nelgen, “Wine's Globalization: New Opportunities, New Challenges”, Paper for the 5th Annual Meeting of the American Association of Wine Economists, Bolzano, Italy, 22-25 June 2011. Circulated as Wine Economics Research Centre Working Paper 0111, June 2011.

39. Anderson, Kym, “Wine’s Future”, interview in Business in Focus, Institute of Chartered Accountants in Australia, December 2010.

40. Anderson, Kym, “The Southern Hemisphere and Global Wine Markets to 2030: Case Study of Australia”, ARE Update 13(6): 6-8, July/August 2010, University of California, Berkeley. (Also Wine Brief No. 1, Wine Economics Research Centre, Adelaide, June 2010. Summary of a Paper presented at the Symposium on Outlook and Issues for the World Wine Market, University of California, Davis, 25 June 2010.)

41. Anderson, Kym, “Global Wine Markets to 2030: Australia’s Place”, in the Proceedings of the 14th Australian Wine Industry Technical Conference, edited by R.J. Blair, T.H. Lee and I.S Pretorius, Adelaide: Australian Wine Research Institute, 2011 (in printed form and CD-ROM). An expanded and revised version appears as “The New World in Globalizing Wine Markets: Lessons from Australia”, Working Paper 0910, Wine Economics Research Centre, Adelaide, June 2010.

42. Anderson, Kym, and Jenni James, “Varietal and Quality Distinctiveness of US Wine Regions”, Contributed Paper presented at the AAWE Annual Conference, University of California, Davis, 27- 29 June 2010.

43. Anderson, Kym, Signe Nelgen, Ernesto Valenzuela and Glyn Wittwer, The Economic Contributions and Characteristics of Grapes and Wine in Australia’s Wine Regions, Report to GWRDC and the Winemakers’ Federation of Australia. Also circulated as Wine Economics Research Centre Working Paper 0110, February 2010. A summary appears in Australian and New Zealand Grapegrower and Winemaker 548: 25-30, September 2009.

44. Anderson, Kym, “Excise Taxes on Wine, Beer and Spirits: High-income and Developing Countries, 2005, 2007 and 2008”, report submitted to Fosters Ltd., February 2009.

45. Anderson, Kym, Christopher Findlay, S. Fuentes and Stephen Tyerman, “Viticulture, Wine and Climate Change”, Commissioned Paper for the Garnaut Climate Change Review, Canberra, June 2008, freely accessible at www.garnautreview.org.au/CA25734E0016A131/pages/all-reports-- resources-commissioned-reports.html

Conference/workshop Powerpoint presentations

46. Anderson, Kym, “Australia’s wine industry: how can it regain and retain growth momentum?”, Agribusiness Advisory Board, Rural Bank, Adelaide, 2 March 2015.

47. Anderson, Kym (with the assistance of N.R. Aryal), “Excise Taxes on Wines, Beers and Spirits: An Updated International Comparison”, WFA’s 2014 Wine Outlook Conference, Adelaide, 2 October 2014.

48. Anderson, Kym, “New Zealand in the Modern Wine World”, Bragato Address to the annual Romeo Bragato National Conference, Blenheim, 27-29 August 2014.

49. Anderson, Kym, “Changing varietal distinctiveness of the world’s wine regions: Evidence from a new global database”, 8th International Conference of the Academy of Wine Business Research, Geisenheim, Germany, 28-30 June 2014.

50. Anderson, Kym, “Evolving Varietal and Quality Distinctiveness of U.S. Wine Regions: Comparative Evidence From a New Global Database”, 8th Annual Conference American Association of Wine Economists, Walla Walla, Washington, 22–25 June 2014.

51. Dry, Peter and Kym Anderson, “International Shiraz Production and Performance”, Symposium on the Future of Cool Climate Shiraz Wines in Australia, Melbourne, 11 June 2014.

52. Anderson, Kym, “Evolving varietal and quality distinctiveness of Australia’s wine regions, Wine”, mini-symposium, AARES Annual Conference, Port Macquarie, NSW, 4-7 February 2014.

53. Anderson, Kym, “A global perspective on the Australian wine industry”, Meeting with senior staff of WFA and Wine Australia, Adelaide, 5 August 2013.

54. Anderson, Kym, “Globalization and the Australian wine industry”, International Wine Law Association Conference, UniSA Law School, Adelaide, 26-27 July 2013.

55. Anderson, Kym, “Emerging varieties for Australia’s wine regions: Evidence from a new global database”, AWITC Workshop on Emerging Varieties, Sydney 15 July 2013.

56. Anderson, Kym and Glyn Wittwer, “A Global Macroeconomic Perspective on Australia’s Wine Industry”, 15th Australian Wine Industry Technical Conference, Sydney, 13-18 July 2013.

57. Anderson, Kym, “Changing varietal distinctiveness of the world’s wine regions: Evidence from a new global database”, 7th Annual Conference of the American Association of Wine Economists, Stellenbosch, South Africa, 26-29 June 2013.

58. Anderson, Kym, “Modeling global wine markets to 2018: Exchange rates, taste changes, and growth in China”, 7th Annual Conference of the American Association of Wine Economists, Stellenbosch, South Africa, 26-29 June 2013.

59. Anderson, Kym, “Australia’s evolving role in the world’s wine markets”, Barossa Next Crop Leadership Program, National Wine Centre, Adelaide, 8 June 2010 and again on 12 June 2013.

60. Anderson, Kym, “Modeling global wine markets to 2018: Prospects for Australia”, Winemakers Federation of Australia Board Workshop, Adelaide, 13 March 2013.

61. Anderson, Kym, “Trends and fluctuations in international competitiveness in globalizing wine markets”, Unified Wine and Grape Symposium, Sacramento, 29-31 January 2013.

62. Anderson, Kym, “Current situation, new opportunities, new challenges for Australia’s wine industry”, Winegrape Growers of America Luncheon, Sacramento CA, 29 January 2013.

63. Anderson, Kym, “Rural Development in Georgia: What Role for Wine Export Growth?”, America-Georgia Business Council 14th Annual Conference, Tbisili, 23-25 October 2011, a World Bank Seminar, Tbilisi, 9 March 2012 and the AAWE-ICABR Workshop on Technology and Innovation in the Wine Industry, Feudi di San Gregoria Winery, Italy, 24 June 2012.

64. Anderson, Kym and Signe Nelgen, “Wine’s Globalization: New Opportunities, New Challenges”, 5th Annual Conference of the American Association of Wine Economists, Bolzano, Italy, 22-25 June 2011. Also presented to Cal Poly State University students at the University of Adelaide campus, 21 February 2012.

65. Anderson, Kym, “Wine’s globalization: New opportunities, new challenges for Australia”, Crush 2011 Symposium, National Wine Centre, Adelaide, 28 September 2011.

66. Anderson, Kym, Tony Battaglene, Peter Hayes and Sakkie Pretorius, “Where Art and Science Meet: Constructing a Better Future for the Wine Sector”, OIV’s 34th World Congress of Vine and Wine, Porto, Portugal, 20-27 June 2011.

67. Anderson, Kym, “Wine and the economic recession”, 5th Annual Conference of the American Association of Wine Economists, Bolzano, Italy, 22-25 June 2011.

68. Anderson, Kym, “Globalizing wine markets: Australia’s evolving role” Institute of Chartered Accountants in Australia’s Wine Industry Day, Adelaide, 25 November 2010.

69. Anderson, Kym, “Globalized wine markets: the New World’s expanding role”, International Wine Forum, Mendoza, Argentina, 2 September 2010.

70. Anderson, Kym, “Global Wine Markets to 2030: Australia’s Place”, 14th Australian Wine Industry Technical Conference, Adelaide, 3-8 July 2010.

71. Anderson, Kym, “Australia’s place in the world’s wine markets: adapting to climate change”, Wine 2030 Conference, National Wine Centre, Adelaide, 29 September 2008 and in revised form at the CSIRO briefing day, CSIRO, Black Mountain, Canberra, 11 December 2009 and at the 14th Australian Wine Industry Technical Conference, Adelaide Convention Centre, 3-8 July 2010.

72. Anderson, Kym and Jenni James, “Varietal and Quality Distinctiveness of US Wine Regions”, 4th Annual Conference of the American Association of Wine Economists, University of California, Davis, 27-29 June 2010.

73. Anderson, Kym, “The Southern Hemisphere and Global Wine Markets to 2030: Case Study of Australia”, Symposium on Outlook and Issues for the World’s Wine Markets, University of California, Davis, 25 June 2010.

74. Anderson, Kym, “Agriculture and viticulture, climate change, and policy responses: a global, economywide perspective”, Australian Farm Institute’s Greenhouse Emissions Conference, Adelaide Convention Centre, Adelaide, 18-19 May 2010.

75. Anderson, Kym, “Australia’s evolving role in the world’s wine markets”, Research Tuesday Lecture, University of Adelaide, 8 March 2010.

76. Anderson, Kym, Ernesto Valenzuela and Glyn Wittwer, “Wine export demand shocks and tax reform in Australia: Regional consequences using an economy-wide approach”, AARES/AAWE workshop on The World’s Wine Markets by 2030: Terroir, Climate Change, R&D and Globalization, Adelaide, South Australia, 7-9 February 2010.

77. Anderson, Kym, “Varietal intensities and similarities of the world’s wine regions”, AARES/AAWE workshop on The World’s Wine Markets by 2030: Terroir, Climate Change, R&D and Globalization, Adelaide Convention Centre, South Australia, 7-9 February 2010.

78. Anderson, Kym, “Excise and Import Taxes on Wine, Beer and Spirits: An International Comparison”, AARES/AAWE workshop on The World’s Wine Markets by 2030: Terroir, Climate Change, R&D and Globalization, Adelaide Convention Centre, 7-9 February 2010.

79. Anderson, Kym, “Wine industry challenges for the next two decades”, AARES/AAWE workshop on The World’s Wine Markets by 2030: Terroir, Climate Change, R&D and Globalization, Adelaide, South Australia, 7-9 February 2010.

80. Anderson, Kym, “Wine industry economic challenges and the alcohol/health issue”, Wine and Health Workshop, Waite Campus, University of Adelaide, 23 November 2009.

81. Anderson, Kym, “Terroir rising? Varietal and quality distinctiveness of Australia’s wine regions”, 53rd AARES Annual Conference, Cairns, 10-13 February 2009 and the Annual Conference of the European Association of Wine Economists, Namur, 21-24 May 2009.

82. Anderson, Kym, “The economic contributions and characteristics of grapes and wine in Australia’s wine regions”, WFA/AWBC/GWRDC briefings, Adelaide, 11 November 2008 and 4 February 2009.

83. Anderson, Kym, “Wine as an investment in the wake of globalization and financial uncertainty”, Institute for Quantitative Investment Research Conference, Chateau la Couspaude, Bordeaux, 9 October 2008.

84. Anderson, Kym, “Economic aspects of climate change for Australia’s wine industry”, Wine and Climate Change Workshop, University of Adelaide, 15 February 2008 and the Climate 2030 Seminar, University of Adelaide, 6 May 2008.

85. Anderson, Kym, “The why and how of ex ante evaluation of grape & wine R&D”, Economic Evaluation of Wine R&D Workshop, National Wine Centre, Adelaide, 12 February 2008. Also presented at a Rural R&D Workshop, Brisbane, 26 March 2008.

Appendix 4: Staff

Professor Kym Anderson, School of Economics and Wine Economics Research Centre, University of Adelaide, and Crawford School of Public Policy, Aust. National University

Mr Nanda Aryal, Wine Economics Research Centre, University of Adelaide

Dr Nicola Chandler, Wine Economics Research Centre, University of Adelaide

Dr Signe Nelgen, School of Economics and Wine Economics Research Centre, University of Adelaide

Dr Jayanthi Thennakoon, School of Economics, University of Adelaide

Dr Ernesto Valenzuela, then at School of Economics, University of Adelaide before moving to Monash University

Professor Glyn Wittwer, Centre of Policy Studies, Monash University (before CoPS moved to Victoria University in 2014)

Appendix 5: Databases

Anderson, Kym and Nanda R. Aryal (2015), Australian Grape and Wine Industry Database, 1843 to 2013, database freely available in Excel files from February 2015 at www.adelaide.edu.au/wine- econ/databases/winehistory/ Also available in PDF form as a free e-book at www.adelaide.edu.au/press/titles/winegrapes

Anderson, Kym and Nanda R. Aryal (2013), Database of Regional, National and Global Winegrape Bearing Areas by Variety, 2000 and 2010, freely available at the Wine Economics Research Centre in Excel and PDF files since December 2013 at www.adelaide.edu.au/wine- econ/databases/winegrapes Revised July 2014. Data can be freely visualized at http://public.tableausoftware.com/profile/kathryn.kincheloe#!/vizhome/GlobalWinegrapeProduc tion_0/1_Overview and are also freely available in PDF form as an e-book at www.adelaide.edu.au/press/titles/winegrapes

Anderson, Kym and Signe Nelgen (2011), Global Wine Markets, 1961 to 2009: A Statistical Compendium, database freely available in Excel and PDF files since March 2011 at www.adelaide.edu.au/wine-econ/databases/GWM/. Also available in PDF form as a free e-book at www.adelaide.edu.au/press/titles/global-wine

Anderson, Kym, Signe Nelgen and Ernesto Valenzuela (2010), Compendium of Grape and Wine Data for Australia’s Wine Regions, 1999 to 2008, database freely available in Excel files since February 2010 at www.adelaide.edu.au/wine-econ/databases/regional-characteristics/