Victoria’s Grape Industry Summer 2010 Key points • This Grape Industry Profile provides an • Whilst the table and dried grape sectors overview of the location, structure and are important to Victoria’s horticultural financial performance of Victoria’s grape industries, a lack of data means that the industry which supplies three different remainder of this profile will primarily focus markets – wine, dried and table. on Victoria’s wine industry. • Wine grapes account for about 80 per cent 2 of total grape industry production in Figure 1: Victoria’s wine production regions Victoria, dried grapes about 12 per cent of production, and table grapes around 9 8 per cent of production.1 • Victoria is the third largest wine producing 10 state in Australia, behind South Australia and New South Wales, with 16.3 per cent of national production in 2007/08 (300,000 tonnes out of 1.8 million tonnes). 13 16 17 • Table grapes in Victoria are grown only 20 in the Sunraysia/Murray Valley region of 6 11 12 14 north-west Victoria. The region produces 19 18 15 80,000 tonnes of ‘late season’ table 2 grapes worth around $135 million each 7 year, representing 60 per cent of Australia’s 8 5 1 21 table grape production. 4 3 • The Sunraysia/Murray Valley region of Victoria accounts for around 98 per cent of Australia’s dried grape production, currently between 10,000 and 20,000 Location of tonnes each year, with a value of Victoria’s wine industry 1. Yarra Valley 11. Bendigo 2. Macedon Ranges 12. Heathcote $39.5 million in 2008-09. Major production by tonnes is centred 3. Mornington Peninsula 13. Goulburn Valley around the Mildura/Swan Hill region, 4. Geelong 14. Strathbogie • Domestic dried grapes production only 5. Sunbury 15. Up. Goulburn but significant wine grape production meets about half of Australia’s annual 6. Pyrenees 16. Rutherglen (by value) does occur throughout the 7. Grampians 17. Beechworth domestic consumption, with the remainder state. Location and climate dictate 8. Henty 18. Alpine Valley mostly imported from the USA, whether warm or cool climate grapes 9. Mildura – Murray 19. King Valley are grown. 10. Swan Hill 20. Glenrowan Turkey and Greece. 21. Gippsland Structure of Victoria’s wine industry Victoria’s wine grape Victoria’s wine grape growing industry includes both production, exports and imports independent growers which sell their produce to wineries and a In 2006, Australia accounted for about 5 per cent of world wine large number of wineries which grow grapes for their own use. production (1,430 million litres out of 28,433 million litres). This In 2007-08, 820 wineries in Victoria were growing grapes and compares with a 2.8 per cent share of global production in making wine.3 Based on a survey of 314 (or 38 per cent) of 2000. these wineries, about 50 per cent are estimated to process Wine grape production in Australia fluctuated between less than 20 tonnes of grapes; about 27 per cent between 21 1.5 million tonnes and 2.1 million tonnes during the period and 49 tonnes of grapes; about 15 per cent between 50 and 2004-05 and 2008-09, with the price and the availability of 400 tonnes of grapes; and about 8 per cent between 400 and water preventing the industry from maintaining supply levels 20,000 tonnes of grapes.4 in the face of extreme weather events. The winemaking sector in Australia is dominated by a small Victoria has around one fifth of Australia’s wine grape area number of large companies, all of which operate several (37,472 hectares of 172,676 hectares), and contributes wineries in Victoria. These companies, listed in Table 2, about one sixth of Australia’s total wine grape production account for approximately 60 per cent of total industry revenue. by weight (299,000 tonnes of 1.83 million tonnes) and volume (195,084 litres of 1.4 million litres). Wine grapes grown in Victoria have a farm gate value of around $282.8 million.5 The historic dominance of red wine varieties over white wine varieties is becoming less pronounced in response to changing consumer preferences. Overall, about 45 per cent of Victoria’s wine grape production is from red varieties, and about 55 per cent from white varieties. Table 1: Tonnes of wine grapes crushed by winery size Category No. of wineries Tonnesa Per cent Micro (less than 20 tonnes) 405 8,953 5 Small (21 – 49 tonnes) 225 7,895 4 Medium (50 – 400 tonnes) 122 37,007 19 Large / super (400 – 20000+ tonnes) 64 143,433 73 Unidentified 4 17 0 Total 820 197,295 100 Source: Victorian Wine Industry Performance and Evaluation and Economic Impact, June 2009. a Based on survey response from 38per cent of wineries in Victoria Table 2: Major wine making companies in Australia Name of company Proportion of national wine grape crush in 2007 (per cent) Constellation Wines Australia 18.3 Foster’s Group Limited 15.9 Australian Vintage 11.5 Pernod Ricard Pacific 9.1 Casella Wines 8.9 2 Victoria’s Grape Industry Summer 2010 Figure 2: Destination of Victoria’s wine exports According to DPI’s ‘Summary of Victorian Food and Fibre Other UK Export Performance’ report for 2009, Victoria’s wine exports declined 57 per cent on 2007 levels to be valued at $255 million. The United Kingdom and USA are Victoria’s largest wine export markets, valued at $95 million and $43 million respectively in 2009. Other important markets include China ($22 million), Canada ($12 million), New Zealand ($11 million) Ireland ($9 million) and Japan ($7 million). Wines produced in Victoria contribute around 11 per cent of national wine export sales ($0.26 billion of $2.5 billion).6 Over recent years Victoria’s wine exports to its traditional markets have declined substantially partly due to increased competition from emerging suppliers such as Chile and Argentina. In 2008, imported wine comprised about 24 per cent of Australia’s domestic wine market - $0.47 billion out of $2.0 billion).7 Denmark Ireland USA Canada China Table 3: Production statistics for Victoria’s wine grape growing regions (2007-08) Region Bearing Tonnes Crush variety (per cent)b Average price per tonne ($AUD)c Hectares Crushed (all grapes) for wine Red White $A 2007/08 $A 2002/03 Murray Darling (Vic) 15,629 202,506 40* 60* 550 590 Swan Hill (Vic) 6,884 84,041 40* 60* 550 590 Yarra Valley 2,625 21,191 55 45 1,750 1,700 Goulburn Valley 1,526 15,105 65 35 950 1,050 Heathcote 1,318 12,112 75 25 1,250 1,400 Rutherglen 1,024 6,540 90 10 950 1,350 Bendigo 1,007 7,467 70 30 1,250 1,350 King Valley 929 11,126 50 50 850 950 Alpine Valleys 849 8,930 55 45 950 950 Pyrenees 755 2,375 65 35 1,500 1,400 Mornington Peninsula 658 4,600 50 50 1,950 1,550 Grampians 658 2,641 90 10 1,950 1,550 Strathbogie Ranges 531 5,166 25 75 1,950 1,400 Geelong 459 2,772 65 35 1,950 1,550 Sunbury 219 1,191 75 25 1,450 1,550 Upper Goulburn 215 2,031 30 70 850 1,050 Glenrowan 205 1,329 99 1 950 1,000 Gippsland 186 837 60 40 1,350 1,200 Henty 172 1,078 55 45 1,950 1,550 Macedon Ranges 149 700 65 35 1,250 1,550 Beechworth 97 813 65 35 950 1,000 Source: Victorian Wine Industry Performance and Evaluation and Economic Impact, June 2009. b. Estimated c. Indicative * Based on combined production data for Vic/NSW 3 Prices Financial performance The average price paid per tonne of wine grapes is significantly of Victoria’s grape industries lower in those regions producing ‘bulk’ wine products (e.g. The wine and grape growing sector in Victoria is dominated by Mildura - Murray, Swan Hill). Growers in regions producing a large number of small private growers, with approximately premium wines, with associated tourism or cellar door sales 80 per cent having less than 49 hectares. activity (e.g. Yarra Valley, Mornington Peninsula) tend to enjoy In 2007-8, 81 per cent of industry establishments had an higher prices for their grapes. As a general trend, Table 3 above estimated value of agricultural output (EVAO) of $150,000 or indicates that, in most cases, bulk wine producing regions less. Only 0.8 per cent of establishments at that time had an experienced a decline in grape prices during the period 2002/03 EVAO of more than $2 million.8 to 2008/09, while those producing premium wines experienced an increase in grape prices during the same period. Small growers are expected to continue to remain the predominant grower type, as the larger wine making Compounding the problem of declining grape prices, growers companies progressively withdraw from grape growing in in ‘bulk’ producing regions also have the added difficulty of order to concentrate on their core business (e.g. Fosters, increased business input costs, particularly irrigation water. Constellation Wines Australia). Total factor productivity The level of capital intensity in the sector is assessed as ‘medium’.9 For every $1 invested in equipment, $5.97 is No data is currently available on total factor productivity in the estimated to be spent on labour. Capital intensity in the sector wine and other grape industries. is generally increasing, particularly in relation to harvesting, which is becoming increasingly mechanised.