Recognition

Croser reflects on 40 years of industry politics – and nothing much has changed!

Author: Brian Croser
Source: WBM
Review Date: Sep 2021

On September 30 I retire by decree, as a director of Wine Australia after an eventful seven years including three quite different iterations of the board and two chairpersons, not counting an interim chairperson.

I am the only soldier left standing from the initial board of Wine Australia, beginning as an amalgamation of the Australian Wine and Brandy Corporation and the Australian Grape and Wine Research and Development Corporation in July 2014.

I have described elsewhere the successes of Wine Australia over, at that time, the six-year journey now a seven-year journey.

Until these past turbulent 22 months, the performance of Wine Australia has been exemplary from both board and management.

A strong strategy was established, consistent with the requirements of our primary stakeholder, Australian Grape and Wine and executed with profound effect.

Even over those past 22 months, punctuated by Covid, bushfires and the China snub, from July 2019 to June 2021 the value of Australian fine wine (>$10/litre) sold in markets other than China grew from $378 million to $499 million, +32 percent.

After 40 years of involvement in wine community politics some things haven’t changed despite the enormous regional and varietal change in our vineyards and wineries, reflected in our export and domestic markets.

That’s a disappointment to me.

The 75 percent of volume and 48 percent of value of winegrapes produced in Australia’s hot irrigated inland regions are made into wine by a few winemakers who are Australia’s largest producers.

That wine is largely sold as bulk and branded commodity everyday wines.

This type of wine business requires the economies generated by scale and the special skills in the vineyard and winery to produce a consistent wine true to the consumer’s expectation of the brand.

There is great value for the whole Australian wine community in the success of this sector providing the Australian wine community at large with economies in the supply chain and presence in markets.

The biggest challenges for this section of the Australian wine community are the impact of climate change in already very hot dry regions, availability and cost of water and distance from market.

Seven years ago, we were still hotly debating the existence of two industry segments.

It is finally now recognised there are two segments with large-shared interests but clearly different dimensional, regional, production and marketing attributes.

Those segments are branded commodity wine and fine wine. Recognition of the differences has been a major advance in determining wine industry strategy.

We can also now talk about Australia’s fine wine terroirs without embarrassment.

The two enduring bones of contention for the important group of inland winemakers are firstly the inequity of the volume-based levy system where 48 percent of the value of Australian winegrapes pays 65 percent of the research and marketing levies because that wine represents 75 percent of the volume of Australian wine.

Fine wine has been the growing market segment in volume and even more in value for decades. By tying levies to the static volume of Australian wine production we lose the opportunity to protect the levy against erosion of spending power as money loses value over time. Also, our research and export marketing agendas do not benefit from the ever-increasing value of Australian wine.

The 2,500+ small and medium winemakers of Australia should acknowledge they need to shoulder a greater share of the levy burden, relieving the mere dozens of large commodity wine producers by supporting a more efficient value-based levy system.

The second enduring issue is the ongoing crusade by some winemakers and regions to change the tax applying to Australian domestic wine sales from the ad valorem WET to a volumetric excise system. If successful, this selfish push would see the price of fine wines come down and the price of everyday wines go up significantly in the domestic market.

The price elasticity of demand for branded commodity wine is large and for fine wine it is much smaller.

A volumetric tax would decimate sales of branded commodity wine with very small increases in sales for fine wine.

It would severely damage a vital component of the Australian wine community with little net benefit to fine wine producers.

These are two very legitimate and vital issues that need resolution for the long-term health of the whole Australian wine community.

There is a third crusade of the inland winemakers with which I partially agree. The hot inland irrigation dependent vineyards do make some very fine wines.

They should make more.

They feel aggrieved their fine wine efforts don’t receive the recognition they deserve. Despite these laudable efforts their stock in trade is and will remain the production of economical bulk and branded commodity wine.

On the other side of the coin the Australian wine community cannot afford its fine wine image to be dominated by the vast irrigated vineyards and ‘wine factories’ of the inland as it was to the detriment of the 2,500+ small and medium producers and their diverse, mainly coastal regions, for the first decade of this century.

We must promote our finest wines and regions to regain international credibility as a fine wine producing country. All Australian vineyards and wineries of all sizes and regions win if we can achieve that.

The alternative of spending Wine Australia’s very scarce marketing dollars on the large, branded commodity labels with their own larger marketing budgets is one of the chip-on-the-shoulder issues promoted by some inland producers.

Another chip-on-shoulder gripe is the claim of the imbalance of the expenditure of research dollars in the cooler coastal regions versus the inland regions. Any audit of Wine Australia’s research program would demonstrate the expenditure is about even for the two industry segments with many programs relevant to both.

Finally, while dealing with the current gripes of some inland producers, they claim that excluding China, export premium wine sales have retreated by more than 40 percent in volume since 2009. That is true but it is a deliberate obscuration of the circumstances over time.

The combined effect of the GFC in 2008 and the pricking of the Parker induced bubble for Australian warm region Shiraz led to a massive shift downwards of the demand curve for Australian fine wine in the US from 2009 to 2013.

Since 2014, excluding the large growth of Australian fine wine in China, the export value of Australian fine wine (>$10/litre) has grown consistently by 11 percent per annum from the low of $214 million in 2013 to $499 million in 2021. 2014 was the year Wine Australia was formed and when it began the project to elevate the international image of Australian fine wine and with it all wine.

I am not claiming credit for Wine Australia for the non-China fine wine growth of the last seven years but its efforts to elevate Australia’s fine wine image have certainly helped.

Over the same time period (2014 to 2021) Australian wine exported to non-China markets at <$10/litre has grown at one percent per annum.

My probably unwanted advice to the inland winemakers is to push hard to achieve levy reform instead of pushing to gain control of the expenditure of Wine Australia’s marketing and research dollars under the current levy system.

What’s next after September 30 other than my unemployment?

The AWRI and the University of Adelaide need to work hand in hand to achieve better vine and wine education and research, to be the best in the world.

They need a new cutting-edge teaching/research winery to optimise this opportunity.

The most powerful key to Australia improving its image and position in international markets is the continuous improvement of the quality of Australian grapes and wine.

Wine Australia needs to continue funding grape and wine quality research as the number one priority.

Wine Australia has achieved a lot for the Australian wine community over the past seven years, the time it has been in existence. It has been an honour and a privilege to serve the Australian wine community as a director of Wine Australia for that entire period.

The Australian wine community has always been independent and resilient.

It has been massively successful across the 50 years I have been part of it, by virtue of its own energy and ingenuity.

It is the primary stakeholder of Wine Australia providing the majority of funds and ideas.

I advise all grapegrowers and winemakers and their organisations to not let their stakeholder primacy be diluted.

The danger of that happening has never been more acute as the industry fragments over the issues addressed here that should have been resolved a long time ago.

Don’t let the politicians and their servants, informed by special interest groups, take over the investment agenda of Wine Australia.

Disunity will invite them to do that with predictable far less than optimal results.

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