Don Farrell (SA, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak about the Australian wine industry, and I trust be Senate will forgive me if I become a little parochial and refer specifically to my own state of South Australia.

It was recently my pleasure to meet with a delegation from the Winemakers Federation of Australia and to hear how the industry is doing and the challenges and opportunities it faces. The wine sector is one of Australia’s major success stories. Over recent decades, wine has enjoyed strong production and export growth, substantial investment, high levels of innovation and increased employment, particularly in regional communities. Its contribution to employment and regional Australia has been substantial. In regional communities, the number of wineries has more than doubled in 10 years to approximately 2,300 in 2008. Wine grape growing contributes to the economy in 89 defined wine areas throughout Australia. Importantly, the wine sector supports almost 30,000 jobs directly and another 30,000 jobs indirectly. In several regions direct employment in grape growing and wine production constitutes more than 20 per cent of total employment. When supported employment is included, the contribution of the wine industry to these regions is much higher.

As of 2008, there were 2,299 wineries operating in Australia, with Victoria having the highest number of wineries at 687, followed by South Australia with 607. New South Wales and the ACT have a combined total of 452, Western Australia has 356, Queensland has 107—your home state, Mr President—and Tasmania has 90. In fact, the Northern Territory is the only state or territory where the wine industry is not a major employer in regional areas. The vast majority of these wineries are small, with around 70 per cent having an annual crush of less than 100 tonnes. South Australia still produces most of Australia’s wine and boasts some of the oldest individual wines in the world, partly because many vines in Europe were destroyed by phylloxera in the late 1800s. There has been a strong rise in regional investment in infrastructure. Around $1.8 billion was invested in new vineyard development in the 1990s and $1.1 billion was invested in the first seven years of this decade. There was around $1.6 billion of capital investment in winery infrastructure between 2001 and 2005. Unlike many industries, wine has the side benefit of being a major contributor to tourism, and the nation’s 1,625 wineries that offer cellar door sales are all key players. Between 2000 and 2006, the number of domestic overnight wine visitors increased at an annual average rate of six per cent, while domestic and international day visitors increased by five per cent and eight per cent respectively.

Wine is Australia’s third largest agricultural export and reached a record $3.02 billion in July 2007. Export volumes have increased by over 225 per cent in the past decade, while export value has grown by 170 per cent. Meanwhile, domestic sales of Australian wine have grown by 22 per cent by volume over the same period. This growth has been broadly based, with the number of major export markets penetrated increasing from six to 17 over the same period. The total number of export markets for Australian wine has doubled from 66 to 130. Australian wine has achieved its growth by improving its market share against other overseas competitors, with Australian sales share of global wine market growing from three per cent in 2000 to five per cent in 2006. The Australian wine share of world trade value has similarly increased from 6.6 per cent in 2000 to 9.4 per cent in 2006. Today Australia is the world’s sixth largest wine producer and the world’s fourth largest wine exporter by volume. Our top export markets include the United Kingdom, worth $795 million; the United States, worth $685 million; Canada, worth $221 million; New Zealand, worth $84 million; China, worth $73 million; and Holland, worth $60 million.

Despite its success, the wine sector faces a number of serious challenges. There has been strong production growth in the New World wine producing region, including Argentina, California, Chile and South Africa, while the Old World wine areas, such as France and Italy, are responding to such growth by improving marketing, adjusting production methods and making regulatory changes to increase their efficiency. In the Australian market, locally produced wine is losing share to imports, resulting in a reversal of a longstanding growth trend. Imports have significantly increased their market penetration in Australia, from three per cent in the year 2000-01 to 11 per cent in 2007-08. In the export market, Australian wine is suffering volume and margin declines in its largest markets of the United Kingdom and the United States. This is not being offset by growth in the newer markets of China, Hong Kong, Japan and the United Arab Emirates. The volume of Australian wine exports declined by 12 per cent in 2007-08 and the value of exports fell by 11 per cent, the first drop in more than 14 years. Retail consolidation and the trend to discounting are also hitting wine manufacturers. Small producers in particular are facing an increased challenge to find a route to market and maintain margins, with many relying more heavily on cellar door, mail order and internet sales.

While there are significant challenges facing the industry, there are also many opportunities. In May 2007 the Australian wine sector launched Wine Australia: Directions to 2025, an industry strategy for sustainable success. Directions was developed to reassess the priorities and challenges facing the industry and identify the potential for the Australian wine sector to sell an extra $4 billion worth of wine over the next five years, lifting cumulative domestic sales and export sales for the period to $30 billion. In addition, emerging markets, such as China, present a significant opportunity for Australian producers. In June 2007 China became the top export destination for Australian bottled wine in Asia. It is expected that this demand will continue to grow, although the global financial crisis is affecting wine sales, as it is with scores of other products.

Of course, South Australia, as the leading wine state, has played an important national role in this industry. Wine grapes were first grown by John Reynell, who planted 500 cuttings near the present township of Reynella in 1841. He was quickly followed by George Anstey, who planted 2,000 cuttings in Highercombe in 1843, and Dr Christopher Rawson Penfold, who quite rightly believed that wine was a useful medicinal and planted his first vineyard at Magill at the foot of the Mount Lofty Ranges in 1844—roughly where the renowned Grange Hermitage vines are now located. German settlers also pioneered the Barossa Valley, where Johann Gramp planted the vines at Jacob’s Creek in 1847. He was followed by Samuel Hoffman, who settled at Tanunda in 1848, and Samuel Smith, who planted the Yalumba vineyards in 1849. Scottish born John Riddoch settled in the Coonawarra in 1861, where he established the Penola Fruit Growing Colony in 1890. It was subsequently renamed Coonawarra in 1897, signalling the birth of Coonawarra’s internationally renowned quality wine. Even by the late 1840s, South Australian wines were making their appearance at dinners given in London by promoters and friends of the new colony. Government regulations, however, were strict, especially on distillers, and this checked expansion of the industry for a while. When one vigneron sent a case of wine to Queen Victoria and got a medal from Prince Albert in 1846, Mount Barker magistrates fined him 10 pounds for making wines without a licence.

In closing, I would like to add that the wine industry will not be immune from the current economic crisis affecting many of our trading partners around the world. Collapsing consumer confidence means that discretionary purchases, including wine, are typically deferred, and the impact of the global financial crisis along with exchange rate volatility would appear to already be having an effect on our export markets. It is said that wine improves with age, and I heartily concur. The older I get, the more I like it!