Appendix B July 2015 Vintage Report WFA winegrape crush and 2016 outlook Overview Total Winegrape Crush in Australia This year’s Vintage Report includes some positive signs for the industry. 1900 Along with shifts in the macro-economic climate – including favorable 8 year average: 1.699 million tonnes shifts in exchange rates, the signing of key Free Trade Agreements 1850 1800 and strengthening consumer demand in some key market segments 2015 crush: 1.67 million – the outlook for the industry has improved from last year. However, 1750 tonnes the Report also indicates an industry under sustained profit pressure 1700 and the persistence of a structural mismatch between the supply and 1650 demand for our wine at profitable price points. ‘000 tonnes 1600 The 2015 Vintage of 1.67 million tonnes which is marginally lower than 1550 “average” and while average grape prices have strengthened, 1500 this is off a low base. 1450 1400 Favorable changes in seasonal market conditions and the macro- economic environment will not be enough to restore the Australian wine sector’s lost share and margin. We need to take pro-active steps 2008 2009 2010 2011 2012 2013 2014 2015 with the support of government to boost demand and our resourcing Average Crush Grape Crush of promotional activities. On the supply side, better informed decision Sources: Historical crush figures – Levies Revenue Service (LRS), ABS and WFA making is required with the aid of improved data, analysis and price signaling. This Report is part of that data set. 2015 winegrape crush This year the WFA Vintage Survey was combined with the Wine The 2015 Australian grape crush is 1.67 million tonnes – just a 0.4% Australia Price Dispersion Survey, the South Australian Grape Crush increase from last year’s Levies Finance 2014 recorded crush of 1.66 Survey and the Murray-Darling / Swan Hill Wine Grape Crush Report million tonnes1. This figure is just below the 8-year average of 1.70 million into a single collection process known as the Australian Wine Sector tonnes and around 7,000 tonnes higher than last year’s crush. The slight Survey 2015. See details of the Australian Wine Sector Survey 2015 increase in overall crush is attributable to Riverina’s increase in yields, offset methodology on page 8. by lower yields in Murray Darling and most cooler temperate regions. The Wine Australia Price Dispersion Survey shows that, overall, Crush by industry structure suggests that the largest 22 respondents the national average winegrape purchase price in 2015 was $463 accounted for around 85% of the total crush. In terms of crush by state/ per tonne – up 5% from the 2014 average of $441 per tonne. See regions, Murray Darling-Swan Hill accounted for 382,000 tonnes or 25% summary of Wine Australia’s Price Dispersion Survey on page 4. of the total crush, New South Wales (excluding Murray Darling-Swan Hill) The 2016 vintage will continue to present challenges to the industry at 332,000 tonnes or 22%, Victoria (excluding Murray Darling-Swan Hill) since we have not seen significant structural shifts. The potential at 60,000 or 4%, South Australia at 717,000 tonnes or 47%, Western benefits from recent Free Trade Agreements and favorable currency Australia at 30,000 or 2% of total crush. See page 3 for more detail. movements should be seized by the industry. The Federation’s The 2012 Expert Review analysis on production profitability has been submissions to government recommend an increase in funding to further expanded to include 2015 data. Increasing 2012 cost of production assist industry reap the benefits of these economic opportunities and by 1.5%, profitable production across 15 representative regions decreased to recapture share and margin in our global markets. Unlocking trade from 7% in 2014 to 6% this reporting period. Low profitability and opportunities and addressing the challenges requires a coordinated breakeven during this time were unchanged, while unprofitable production effort, including from the industry, groups of stakeholders, and increased to 85%. See pages 5 and 6 for discussion. individual companies. See discussion on page 7. 1. This is based on Levies Finance 2014 recorded crush at 1,662,791 tonnes. See survey methodology for further details. www.wfa.org.au Appendix B 02 Vintage Report Crush by variety The 2015 red crush stands at 835,500 tonnes and the white crush stands at 834,000 tonnes. Compared to last vintage, the 2015 red White variety crush change 2014-2015 crush has decreased by 4% or 30,751 tonnes and the white crush has 100% increased by 5% or 37,524 tonnes. 80% 60% The top three red varieties by crush were Shiraz, Cabernet Sauvignon 40% and Merlot, together accounting for 85% of the total red crush. Shiraz 20% continues to dominate with 47% of the total red crush though with 0% a 6% decrease from last year. Largest decreases were Dolcetto -20% (-50% or -640 tonnes), Lagrein (-35% or -90 tonnes), Ruby Cabernet -40% (-25% or -4,052 tonnes) and Tarrango (-23% or -109 tonnes). -60% -80% -100% Red variety crush change 2014-2015 Arneis Sultana Riesling Viognier Semillon Traminer Verdelho Doradillo Trebbiano 120% Marsanne Colombard Muscadelle Other White Chardonnay Chenin Blanc Moscato Giallo 100% Sauvignon Blanc 80% Blanco Muscat Gordo Pinot Gris & Pino Grigio Palomino & Pedro Ximenes Palomino & Pedro 60% Muscat a Petit Grains Blanc 40% 20% There was no change in the composition of the Top 10 varieties form 0% last year, but some of the rankings have changed – Pinot Gris & Pinot -20% Grigio ranked 6th (previously 8th), Semillon ranked 7th (previously 6th), Colombard ranked 8th (previously 9th) and Muscat Gordo Blanco now -40% ranked 9th (previously 7th). -60% Durif Shiraz Merlot Mataro Malbec Lagrein Barbera Dolcetto Tarrango Grenache Pinot Noir Other Red Tempranillo Sangoivese Petit Verdot Nero D’Avola Nero Top 10 Varieties Ruby Cabernet Cabernet Franc Cabernet Sauvignon Comparison of 2014 and 2015 vintages 500 Muscat a Petit Grains Rouge 450 400 350 In the whites, Chardonnay still dominates the white crush at 45% – 300 an increase of 28,726 tonnes from last year. Sauvignon Blanc remains 250 in second place with 11%, followed by Pinot Gris and Pinot Grigio 200 accounting for 9% of total white crush. Largest increases are Other 150 ‘000 tonnes white (+85% or +17,731 tonnes), Palomino & Pedro Ximenes (+51% or 100 +91 tonnes), Muscadelle (+41% or +152 tonnes) and Verdelho +29% 50 or +2,308 tonnes). Largest deceases are Muscat a Petit Grains Blanc 0 (-95% or -13,881 tonnes), Viognier (-52% or -7,488 tonnes), Doradillo Shiraz (-51% or -580 tonnes) and Marsanne (-44% or -1,767 tonnes). Merlot Semillon Pinot Noir Colombard Chardonnay Sauvignon Blanc 2014 2015 Cabernet Sauvignon Muscat Gordo Blanco Muscat Gordo Pinot Gris & Grigo Appendix B 03 Change % change % of Crush by wine industry Variety 2014 2015 2014-2015 2014-2015 grape structure (tonnes) crush The Australian wine industry is made up of Red Varieties a small number of large wineries and a large Barbera 266 417 151 56% 0.02% number of small wineries. The crush survey Cabernet Franc 1,119 1,070 (49) -4% 0.06% results demonstrates this – the largest 20 Cabernet Sauvignon 226,386 209,588 (16,798) -7% 12.55% crush respondents accounted for 85% of the Dolcetto 1,273 633 (640) -50% 0.04% total crush and largest 30 accounted for 90%. Durif 4,535 5,858 1,323 29% 0.35% The respondents to the 2015 Vintage Survey Grenache 13,045 12,614 (431) -3% 0.76% resemble this: Lagrein 259 169 (90) -35% 0.01% Size of # of Malbec 2,674 3,123 449 17% 0.19% reported crush respondents Mataro 5,006 6,554 1,548 31% 0.39% 10,000 tonnes + 22 Merlot 114,413 107,280 (7,133) -6% 6.43% 5,000-10,000 tonnes 11 Muscat a Petit Grains Rouge 769 1,133 364 47% 0.07% 1,000-5,000 tonnes 37 Nero D’Avola 412 825 413 100% 0.05% 500-1,000 tonnes 42 Petit Verdot 19,534 20,861 1,327 7% 1.25% 50-500 tonnes 166 Pinot Noir 30,260 43,488 13,228 44% 2.60% Under 50 tonnes 245 Ruby Cabernet 16,125 12,073 (4,052) -25% 0.72% Total 523 Sangiovese 2,991 4,554 1,563 52% 0.27% Shiraz 415,138 391,649 (23,489) -6% 23.46% Tarrango 481 372 (109) -23% 0.02% Crush by state and region Tempranillo 5,364 4,280 (1,084) -20% 0.26% Looking at the raw crush data by state/regions, Other red 6,221 8,983 2,762 44% 0.54% Murray Darling-Swan Hill accounted for 382,000 Total Red Varieties 866,274 835,523 (30,751) -4% 50.04% tonnes or 25% of the total crush, New South Wales at 332,000 tonnes or 22%, Victoria at White Varieties 60,000 or 4%, South Australia at 717,000 Arneis 213 175 (38) -18% 0.01% tonnes or 47%, Western Australia at 30,000 Chardonnay 347,613 376,339 28,726 8% 22.54% or 2% – ACT, Queensland and Tasmania Chenin Blanc 5,458 5,880 422 8% 0.35% contribute under 1% of the total crush. Colombard 54,503 63,093 8,590 16% 3.78% State/regions 2015 Raw Crush Doradillo 1,142 562 (580) -51% 0.03% Data Tonnes Marsanne 3,999 2,232 (1,767) -44% 0.13% Australian Capital Territory 21 Moscato Giallo 3,708 2,518 (1,190) -32% 0.15% Murray Darling-Swan Hill 381,732 Muscadelle 375 527 152 41% 0.03% New South Wales 332,092 Muscat a Petit Grains Blanc 14,674 793 (13,881) -95% 0.05% - Hunter Valley 4,904 Muscat Gordo Blanco 64,051 55,303 (8,748) -14% 3.31% - Mudgee 2,887 Palomino & Pedro Ximenes 177 268 91 51% 0.02% - Riverina 291,405 Pinot Gris & Pinot Grigio 60,303 74,867 14,564 24% 4.48% Victoria 60,258 Riesling 22,200 26,735 4,535 20% 1.60% - Mornington Peninsula 1,883 Sauvignon Blanc 93,364 89,125 (4,239) -5% 5.34% - Rutherglen 2,116 Semillon 69,766 66,572 (3,194) -5% 3.99% - Yarra Valley 10,462