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Wine Australia

STATE OF
Providing supply and demand information on

Wine Australia AUSTRALIAN


Australian wine

WINE
Providing supply and
demand information
for
Results of the 2015 Wine Production,
Inventory and Domestic Sales Survey

Australian wine

Wine Australia

March 2016
CONTENTS

Contents ............................................................................................................................................................ 2

Survey Methodology........................................................................................................................................... 3

Disclaimer ........................................................................................................................................................... 4

Survey Results ..................................................................................................................................................... 5

Australian Wine GrapeCrush......................................................................................................................... 6

Wine Production .............................................................................................................................................. 6

Domestic Sales ................................................................................................................................................. 7

Domestic Sales by Channel ........................................................................................................................... 7

Australian Wine Exports .................................................................................................................................. 8

Total Australian Wine Sales ............................................................................................................................ 8

Inventory ........................................................................................................................................................... 9

Historic Supply and Demand Balance ....................................................................................................... 10


SURVEY METHODOLOGY

Wine Australia’s 2015 Production, Inventory and Domestic Sales Survey was sent to 2,620 wineries who are
registered as producing wine with the Levy Revenue Service. Wine Australia received responses from 202 of
those. Despite the proportionally low count of wineries, it is estimated that the survey collected the bulk of the
total volume of production and sales. It is estimated that data was collected on the following share of each
component;

• Production: 84%
• Domestic sales: 82%

Although the smaller wineries do not significantly impact the aggregated statistics, the data collected is
valuable to measure the important contribution of the thousands of smaller wineries. A customized
benchmarking report was sent to the survey’s contributors.

Production

Total production was calculated based on three sets of data provided to Wine Australia. Firstly, the total crush
was sourced from the Levy Revenue Service (LRS), who received payment on 1.7 million tonnes of crushed
grapes. An extraction rate was calculated based on the results of the Production, Inventory and Domestic Sales
Survey and the Wine Australia’ National Vintage Survey which was used to calculated total wine production in
Australia. This was then aligned to the production data received in the Production, Inventory and Domestic
Sales Survey.

Inventory

The inventory data reported in this paper is based on an industry supply and demand balance calculation. The
basic industry calculation is as follows;

Inventory (June 2015) = Inventory (June 2014) + Wine production (2014-15) – Total sales (2014-15)

The inventory statistics collected in 2015 Production, Inventory and Domestic Sales Survey alone are not
enough to accurately represent an industry wide inventory figure as the survey did not collect bulk wine
transfers between wineries.

Domestic sales

Figures from ABS’s 8504.0 - Shipments of Wine and Brandy in Australia by Australian Winemakers and
Importers, June 2014 were used as a base (2013-14 figures) which the results from the Production, Inventory
and Domestic Sales Survey were applied to.
DISCLAIMER

This information has been made available to assist on the understanding that the Australian Grape and Wine
Authority, trading as Wine Australia, is not rendering professional advice. The information contained in this
email is not legally binding and is not intended to be a substitute for legal advice. The information in this email
is based on the Wine Australia’s understanding as to the requirements of the market at the time. Wine
Australia does not accept responsibility for the results of any actions taken on the basis of the information
contained in this email, nor for the accuracy, currency or completeness of any material contained in it. Wine
Australia expressly disclaims all and any liability and responsibility to any person in respect of consequences of
anything done in respect of reliance, whether wholly or in part, upon this email.
SURVEY RESULTS

Table 1: Wine production by wine style (litres)

2013-14 2014-15 Change


Red table wine 580,153,705 580,148,098 0.0%
Rosé 17,315,111 13,387,116 -22.7%
Fortified (red or white) 13,044,406 10,471,673 -19.7%
Sparkling - carbonated 4,363,607 6,310,842 44.6%
Sparkling - fermented 35,628,697 30,491,535 -14.4%
White table wine 535,837,474 550,383,669 2.7%
Total wine production 1,186,343,001 1,191,192,932 0.4%
Other grape product 68,631,856 51,971,886 -24%

Table 2: Wine inventory by wine style (litres)

2013-14 2014-15 Change


Wine from red grapes 1,013,624,476 1,009,097,659 -0.4%
Wine from white grapes 614,884,715 630,741,734 2.6%
Total wine inventory 1,628,509,191 1,639,839,393 0.7%

Table 3: Domestic wine sales by colour (litres)

2013-14 2014-15 Change


Fortified 19,411,000 19,643,932 1.2%
Red and Rose 172,776,744 174,872,723 1.2%
Sparkling 51,555,051 50,111,510 -2.8%
White 214,737,868 211,298,216 -1.6%
Grand Total 458,480,663 455,926,381 -0.6%

Table 4: Domestic wine sales by colour (AUD)

2013-14 2014-15 Change


Fortified $97,082,521 $101,085,206 4.1%
Red and Rose $1,071,618,646 $1,155,257,979 7.8%
Sparkling $458,775,506 $452,002,552 -1.5%
White $1,048,389,034 $1,068,995,052 2.0%
Total sales $2,675,865,707 $2,777,340,791 3.8%

Table 5: Domestic sales by channel (litres)

2013-14 2014-15 Change


Sales direct to consumer 41,501,743 42,121,916 1.5%
Sales to retailers 416,978,920 413,804,465 -0.8%
Total sales 458,480,663 455,926,381 -0.6%
AUSTRALIAN WINE GRAPECRUSH

According to Levy Revenue Service, a total of 1.71 million tonnes of wine grapes were crushed in 2015
– up from 1.66 million tonnes in 2014. The white grape crush drove the growth, up 7 per cent to
850,000 tonnes. Conversely, the red crush declined slightly – down 1 per cent to 857,000 tonnes.

Figure 1: Wine grape crush by colour

Source: ABS, Wine Australia, Levy Revenue Service and WFA

WINE PRODUCTION

As a result of the higher white crush, total wine production also increased – up 0.4 per cent to 1.191
billion litres. Total white wine increased by 2.7 per cent to 550 million litres. The increase was lower
than the increase in crush as the extraction rate declined from 725 litres per tonne to 693 litres per
tonne. The conversion of white wine grapes into non-wine products is likely to be a major influence in
the declining extraction rate. Total red wine production declined marginally to 580 million litres. The
extraction rate remained constant from the year before at 703 litres per tonne.
DOMESTIC SALES

While the total volume of wine sales was down in 2014-15, the total value of domestic sales increased
strongly. The total value of sales increased by 3.8 per cent to A$2.78 billion1 while the volume
declined by 0.6 per cent to 456 million litres.

Red and rose sales was the best performing category, up 1.2 per cent to 174.9 million litres (value up
7.8 per cent to $1.16 billion). White wine recorded the largest decline, down by 1.6 per cent to 211
million litres (value up 2.0 per cent to $1.07 billion). A similar trend was present for both fortified and
sparkling wines. Sparkling declined by 2.8 per cent to 50.1 million litres (value increased by 1.5
percent to $452 million), while fortified sales increased by 1.2 per cent to 19.6 million litres (value
increased by 4.1 per cent to $101 million).

Figure 2: Domestic sales volume share Figure 3: Volume growth by wine style

1. Wholesale prices if sold to retailers while retail prices if sold direct to consumers

DOMESTIC SALES BY CHANNEL

Wineries are having more success selling wine direct to the consumer. In 2014-15, direct sales
increased 1.5 per cent to 42.1 million litres. The retail channel proved to be the more difficult channel,
down 0.8 per cent to 414 million litres.

Most wineries recorded an increase in sales direct to consumer. Of the 196 responses, a total of 102
recorded increasing sales, 55 recorded a decline and a further 39 did not responded to this section
of the survey. All size ranges of wineries reported a success in selling direct to consumers.
AUSTRALIAN WINE EXPORTS

In the 12 months to 30 June 2015, the value of Australian wine exports increased by 5 per cent to
A$1.89 billion and the average value of exports increased by 0.3 per cent to A$2.61 per litre.
Australian wine exports increased in volume by 4 per cent to 724 million litres. This is the first time
value has increased on a financial year basis since 2006-07 while volume is the highest since 2010-11.

Red wine exports increased strongly, up 5 per cent to 406 million litres (value up 8 per cent to $1.3
billion). Although more white wine was exported, the total value declined slightly. Total volume
increased by 3 per cent to 304 million litres (value declined by 2 per cent to $508 million).

TOTAL AUSTRALIAN WINE SALES

As Australian wine exports offset a decline in the domestic market, total wine sales by the Australian
wine community increased by 2.4 per cent to 1.18 billion litres while value increased by 4.1 per cent to
$4.7 billion.

Wine produced from red wine grapes increased by 4.1 per cent to 607 million litres while wine made
from white wine grapes increased by 0.7 per cent to 573 million litres.

Figure 4: Total sales of Australian wine by colour


INVENTORY

The stock of red wine has been relatively stable for the past 3 years; however there have been varying results
for the stocks to sales ratio (SSR). In 2013-14, the SSR increased from 1.62 to 1.74 primarily driven lower
exports. In 2014-15, the SSR once again declined as the export market improved again. An ideal SSR for red
wine inventory is debatable. A good range is generally excepted to be anywhere from 1.4 to 1.6 as red wine
takes more time to produce and better quality reds need time in the cellar.

Figure 5: Red wine stocks and stock to sales ratio

Stock to sales ratio Million litres

1.9 800
SSR
1.8 Wine Production 750
Total sales
1.7
700

1.6
650
1.5
600
1.4
550
1.3

500
1.2

1.1 450

1.0 400
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

Figure 5 illustrates that white wine inventory has been relatively stable around the 600 million litre level. The
volatility in the SSR is primarily driven by variation in the export market. In the past decade domestic sales
have ranged between 210 million litres and 222 million litres while the export market has ranged between 243
million litres and 304 million litres. In 2014-15, the SSR edged up slightly from 1.08 to 1.10 which is considered
a normal level. This leaves enough wine in stock to cover growing sales but does not push the market into
large oversupply.

Figure 5: White wine stocks and stock to sales ratio

Stock to sales ratio Million litres

1.50 650
SSR
1.45 Wine Production
Sales
1.40 600

1.35

1.30 550

1.25

1.20 500

1.15

1.10 450

1.05

1.00 400
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
HISTORIC SUPPLY AND DEMAND BALANCE

Red

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Crush (thosand tonnes) 1,056 680 959 913 866 766 830 898 866 857
Extraction Rate (litres per tonne) 735 695 703 689 718 732 728 733 703 703
Wine Production (million litres) 776 472 674 629 622 561 604 658 609 602
Stocks (million litres) 1,165 956 1,019 1,011 961 910 899 987 1,014 1,009
Exports (million litres) 455 497 446 442 468 447 435 406 385 406
Other red exports (fortified and sparkling) (million litres) 5 6 7 7 7 6 6 6 5 7
Domestic sales (million litres) 154 166 161 171 176 173 173 175 173 175
Other red domestic sales (fortified and sparkling) (million litres) 24 23 22 22 22 23 21 21 20 20
Total sales (million litres) 637 692 637 641 674 649 635 608 583 607
SSR (years) 1.83 1.38 1.60 1.58 1.43 1.40 1.42 1.62 1.74 1.66

White

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Crush (thosand tonnes) 846 718 873 819 707 837 828 851 797 850
Extraction Rate (litres per tonne) 735 662 651 662 715 644 733 659 725 693
Wine Production (million litres) 622 475 568 543 505 539 607 561 578 589
Stocks (million litres) 769 593 663 670 581 586 629 633 615 631
Exports (million litres) 265 283 243 292 291 267 268 281 296 304
Other white exports (million litres) 11 12 12 10 11 11 10 9 8 7
Domestic sales (million litres) 213 222 212 212 219 219 216 210 215 211
Other white domestic sales (fortified and sparkling) (million litres) 43 45 44 45 53 49 47 48 51 50
Total sales (million litres) 531 562 512 560 575 545 541 548 569 573
SSR (years) 1.45 1.06 1.30 1.20 1.01 1.07 1.16 1.16 1.08 1.10

Total

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15
Crush (thosand tonnes) 1,902 1,397 1,832 1,733 1,573 1,602 1,658 1,748 1,663 1,707
Extraction Rate (litres per tonne) 735 678 678 676 716 686 730 697 713 698
Wine Production (million litres) 1,398 947 1,242 1,172 1,127 1,100 1,211 1,219 1,186 1,191
Stocks (million litres) 1,934 1,549 1,682 1,681 1,542 1,496 1,528 1,620 1,629 1,640
Exports (million litres) 720 780 690 734 759 714 703 687 681 710
Other wine exports (million litres) 16 18 19 17 18 17 15 15 14 14
Domestic sales (million litres) 367 388 373 383 396 393 389 385 388 386
Other domestic sales (fortified and sparkling) (million litres) 66 68 66 67 75 72 69 69 71 69
Total sales (million litres) 1,169 1,254 1,148 1,201 1,248 1,195 1,176 1,156 1,152 1,180
SSR (years) 1.65 1.23 1.47 1.40 1.24 1.25 1.30 1.40 1.41 1.39

Other wine grape product (million litres) na na na na na na na na 68.6 52.0