C1214 Wine Production in Australia Industry Report

AU INDUSTRY (ANZSIC) REPORT C1214
Wine Production in Australia

Cellar turmoil: Exports are set to decline in the current year due to the COVID-19
outbreak
Matthew Reeves | September 2021
IBISWorld.com +61-3-9655-3800 info@IBISWorld.com

Wine Production in Australia C1214 September 2021
Contents
About This Industry...........................................5 Competitive Landscape...................................32
Industry Definition..........................................................5 Market Share Concentration....................................... 32

Major Players................................................................. 5 Key Success Factors................................................... 32
Main Activities................................................................5 Cost Structure Benchmarks........................................ 33
Supply Chain...................................................................6 Basis of Competition................................................... 37
Similar Industries........................................................... 6 Barriers to Entry........................................................... 38
Related International Industries....................................6 Industry Globalization..................................................39
Industry at a Glance.......................................... 7 Major Companies............................................ 41
Executive Summary....................................................... 9 Major Players............................................................... 41

Other Players................................................................46
Industry Performance..................................... 10
Operating Conditions...................................... 48
Key External Drivers.....................................................10
Current Performance................................................... 12 Capital Intensity........................................................... 48
Technology And Systems........................................... 49
Industry Outlook............................................. 16 Revenue Volatility........................................................ 51
Regulation & Policy...................................................... 52
Outlook......................................................................... 16
Industry Assistance..................................................... 53
Performance Outlook Data......................................... 18
Industry Life Cycle....................................................... 18 Key Statistics.................................................. 56
Products and Markets..................................... 21 Industry Data................................................................56

Annual Change.............................................................56
Supply Chain................................................................ 21
Key Ratios.................................................................... 56
Products and Services.................................................21
Demand Determinants................................................ 23 Additional Resources...................................... 57
Major Markets..............................................................25
International Trade.......................................................27 Additional Resources.................................................. 57
Business Locations..................................................... 29 Industry Jargon............................................................ 57
Glossary Terms............................................................57
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Covid-19
Coronavirus IBISWorld's analysts constantly monitor the industry impacts of current events in
real-time – here is an update of how this industry is likely to be impacted as a result
Impact Update of the global COVID-19 pandemic:
• Revenue for the Wine Production industry is expected to fall by 1.2% in the current
year with a range of COVID-19 restrictions constraining demand. For more detail,
please see the Current Performance chapter.
• Industry exports are anticipated to fall in the current year due to the COVID-19
outbreak. Both local and foreign demand is expected to fall. For more detail, please
see the International Trade chapter.
• Profit margins have been impacted by reduced sales to licensed establishments

over the past two years due to COVID-19 restrictions. For more detail, please see
the Cost Structure Benchmarks chapter.
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About This Industry

Industry Definition The industry purchases grapes and other key ingredients to process into wine, port
and wine-based alcoholic beverages. These products are packaged in bottles or
casks and sold to wine merchants and retail outlets. The industry also includes the
production of other alcoholic beverages not categorised elsewhere, such as cider.
Major Players Treasury Wine Estates Limited
Casella Wines Pty Limited
Pernod Ricard Pacific Holding Pty Ltd
Amphora Australia Pty Ltd
Main Activities The primary activities of this industry:

Red wine production
White wine production
Sparkling wine production
Fortified wine production
Cider production
Sherry production
Perry production
Mead production
The major products and services in this industry:

Red wine
White wine
Cider
Other wines and alcoholic beverages
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Supply Chain
SIMILAR INDUSTRIES
Grape Growing in Australia Liquor Wholesaling in Liquor Retailing in Australia Pubs, Bars and Nightclubs in
Australia Australia
RELATED INTERNATIONAL INDUSTRIES
Global Wine Manufacturing Wineries in the US Cider Production Wine Production in China
Wine Production in the UK Cider Production in the UK Wine Production in New

Zealand
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Industry at a Glance
Key Statistics Key External Drivers % = 2017-2022 Annual Growth
$6.9bn 0.0%
Per capita alcohol consumption
1.3%
Total alcohol consumption
Revenue
-1.0% 1.0%
Annual Growth Annual Growth Annual Growth Domestic price of wine grapes Demand from liquor retailing
2017-2022 2022-2027 2017-2027 -2.4% -0.3%

Demand from pubs, bars and nightclubs Trade-weighted index
-0.6% 2.5%
Industry Structure
$409.8m POSITIVE IMPACT

Profit
Annual Growth Annual Growth Concentration

Low
2017-2022 2017-2027
-8.2% MIXED IMPACT
Life Cycle Revenue Volatility

5.9% Mature Medium
Profit Margin
Capital Intensity Industry Assistance
Annual Growth Annual Growth Medium Medium
2017-2022 2017-2027
Regulation Technology Change
Medium Medium
-2.9pp
Barriers to Entry
Medium
1,954
Businesses NEGATIVE IMPACT
Annual Growth Annual Growth Annual Growth
Globalization Competition
2017-2022 2022-2027 2017-2027
High High
0.7% 1.1%
Key Trends
14,754 The trend towards premiumisation in wine consumption has

supported the industry
Employment
Revenue is expected to fall substantially in the current year
Annual Growth Annual Growth Annual Growth due to new import tariffs from China
2017-2022 2022-2027 2017-2027 The dominance of supermarkets in downstream liquor
retailing is concerning for wine producers
-2.5% 2.0%
Export growth is forecast to drive the industry's performance
over the next five years
$1.1bn Undersupply of wine is projected to become an issue for the

industry over the next five years
Wages
Profit margins are forecast to improve from a low base year
Annual Growth Annual Growth Annual Growth as the industry returns to balance
2017-2022 2022-2027 2017-2027
COVID-19 restrictions and trade restrictions from China have
driven industry declines over the past five years
-0.4% 2.3%
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Products & Services Segmentation
59.5% 32.2% 4.0% 4.3%
Red wine White wine Cider Other wines and alcoholic

beverages
Wine Production
Source: IBISWorld
Major Players % = share of industry revenue SWOT
STRENGTHS
High Profit vs. Sector Average
Low Customer Class Concentration
WEAKNESSES
High Competition
Medium Imports
High Product/Service Concentration
Low Revenue per Employee
High Capital Requirements
OPPORTUNITIES
High Revenue Growth (2022-2027)
High Performance Drivers
Trade-weighted index
THREATS
Very Low Revenue Growth (2005-2022)
Low Revenue Growth (2017-2022)
Per capita alcohol consumption
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Executive The Wine Production industry has faced mixed trading conditions
Summary over the past five years.
The industry has benefited from growing global demand for Australian wine and
premiumisation trends. Exports have benefited from the relatively weak Australian
dollar and a number of free trade agreements with countries in the Asia-Pacific.
However, slow growth in alcohol consumption has constrained demand in the
domestic market. The COVID-19 pandemic has severely affected the food-service
market over much of the three years through 2020-21. However, the Chinese
Government's decision to impose tariffs in excess of 100% is expected to have the
greatest impact on the industry. Since 2016-17, China had been the largest export
market for Australian wine. Consequently, the sharp drop in demand is expected to
cause industry revenue to decline 3.4% in the current year. Overall, industry revenue
is expected to fall at an annualised 0.6% over the five years through 2021-22, to
$6.9 billion.
The industry has continued to recover from a global oversupply of wine over the
past five years. Struggling winemakers increased their production of cheap, low-
quality wine to reduce average fixed costs and increase their qualification for the
wine equalisation tax rebate offered by the ATO. However, demand and supply have
moved closer to parity following some declines in global and domestic production,
and growing demand in foreign markets for Australian wine. Increased export
demand for premium wine has improved industry prices and profit margins over
most of the past five years. However, profitability has fallen over the past two years
due to the COVID-19 pandemic and a significant decline in demand from China.
The industry is projected to recover over the next five years, as restrictions related
to the COVID-19 pandemic ease further and the economy recovers. Total alcohol
consumption is forecast to increase over the period despite per capita alcohol
consumption continuing to decline, increasing demand for wine. However, revenue
growth will likely be subdued as the industry repositions itself away from China.
Smaller players may struggle to find new markets, which may increase competition
in the domestic market and limit profitability. However, new export opportunities are
projected to emerge over the period. Growing markets include Hong Kong, South
Korea, and Taiwan. Overall, industry revenue is forecast to grow at an annualised
2.5% over the five years through 2026-27, to $7.9 billion.
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Industry Performance
Key External Per capita alcohol consumption

Drivers Trends in per capita alcohol consumption greatly affect demand for wine, cider and
other beverages produced by the industry. Higher per capita alcohol consumption
generally boosts industry demand, although this depends on relative demand for
wine compared with other alcoholic beverages, such as beer and spirits. Several
factors have moderated Australia's per capita alcohol consumption over the past
decade, including rising health consciousness, anti-drink-driving campaigns and the
stricter enforcement of laws regarding alcohol consumption. However, per capita
alcohol consumption is expected to increase in 2021-22.
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Total alcohol consumption

Total alcohol consumption directly affects demand for industry products. Over the
past decade, more people have chosen to consume wine and cider over beer and
spirits, increasing demand for industry products. Total alcohol consumption has
increased over the past five years, despite a drop in per capita consumption, due to
population growth. Total alcohol consumption is anticipated to increase in 2021-22.
Demand from liquor retailing

The Liquor Retailing industry is one of the most significant markets for winemakers.
The Wine Production industry relies heavily on orders from retailers to generate
revenue. Generally, increased demand from retailers boosts sales of wines and
other industry products. Demand from liquor retailing is expected to decrease in
2021-22, due to the surge in sales over the past two years. However, this depends
on the length and number of lockdowns around the country during the year.
Demand from pubs, bars and nightclubs

Pubs, bars and nightclubs are key buyers of industry products. Manufacturers need
to maintain good relationships with these establishments to generate sales.
Increased demand from this market typically boosts revenue, while falling demand
can negatively affect the industry's performance. Growing demand from pubs, bars
and nightclubs provides an opportunity for the industry to expand. Demand from
pubs, bars and nightclubs is anticipated to grow in 2021-22. However, COVID-19
restrictions in place in a number of states at the time of writing potentially threaten
this growth.
Trade-weighted index
The trade-weighted index measures the value of the Australian dollar compared
with a basket of currencies of Australia's major trading partners. The value of the
Australian dollar relative to the currencies of these trading partners affects the
competitiveness of Australian wines in export markets. An appreciation of the
Australian dollar increases the price of local wines in export markets, reducing their
price competitiveness and demand. Conversely, a weaker dollar improves the
competitiveness of Australian exports and typically strengthens demand. The trade-
weighted index is expected to rise in 2021-22.
Domestic price of wine grapes

Wine grapes are the major input into wine production and represent the industry's
largest purchase cost. Wine grape prices are volatile and affected by growing
conditions. When prices are higher, purchase costs increase. Larger producers can
typically absorb higher production costs as reduced profitability. However, many
mid-to-small-scale operators pass on higher purchase costs to customers, which
can increase industry revenue if the higher prices do not cause a greater decline in
demand. The domestic price of wine grapes is anticipated to increase in 2021-22.
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Current The Wine Production industry has declined over the past five years
Performance due to the effects of variable operating conditions.
The industry's performance relies heavily on trends in international trade, per capita
alcohol consumption, and downstream demand from liquor retailers and pubs, bars
and nightclubs. Operating conditions have been challenging over the period, due to
the effects of the COVID-19 pandemic, changing consumer trends and growing
competition from other New World wine producers. On-premise wine consumption
fell considerably in 2019-20 and 2020-21 due to persistent COVID-19 restrictions.
Demand from hospitality businesses is again threatened in the current year by the
lockdowns in New South Wales and to a lesser extent Victoria and South Australia.
However, the Chinese Government's decision to impose tariffs on all Australian
wine entering the country is likely to have the most significant effect on the
industry. These have been labelled anti-dumping duties by China, with the country
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accusing industry operators of selling wine to them below the cost of production.
Strong growth in demand from this market over the prior four years had
underpinned much of the positive performance of the overall industry. A collapse in
demand from this market is expected to drive a 3.4% decline in industry revenue in
the current year. Stabilising per capita alcohol consumption and rising demand for
premium products, such as prosecco, has boosted revenue over the period.
However, competition from other alcoholic beverages, particularly spirits has
weakened demand for cider. Overall, industry revenue is expected to decline at an
annualised 0.6% over the five years through 2021-22, to $6.9 billion.
A shift in consumer preference towards premium, higher-priced industry products

supported industry profit margins over most of the past five years, but the COVID-19
pandemic has offset this growth. Government restrictions on licensed
establishments, travel and tourism have significantly affected high-margin on-
premise sales. However, the tariffs from China are expected to have an even greater
impact on profitability. A large share of wine sales to China are in premium price
categories. Overall, industry profitability is expected to decline over the five years
through 2021-22.
Premiumisation
Increases in the per-litre value of wine consumed in Australia and

exported overseas aided industry revenue over much of the past
five years.
Trends favouring premiumisation in wine consumption have helped offset slow
growth in alcohol consumption, including stable per capita alcohol consumption, as
consumers have purchased higher value products. This shift has also aided
revenue growth for boutique cider producers over the period.
Exports and domestic sales have outpaced growth in production volumes over
much of the past five years, as consumers have shifted from low-value wines to
higher value products. Demand growth from emerging markets, particularly China,
has been the main contributor to this trend. Chinese demand for foreign-produced
wine increased considerably over the three years through 2019-20, making China
the largest international consumer of Australian wines. However, supply is expected
to outweigh demand in the current year, as the industry faces the first full year of
the prohibitive anti-dumping duties put in place by the Chinese Government.
Global markets
Australian wine exports have grown strongly over the past five
years, assisted by the relatively weak Australian dollar.
While cheap Australian wines dominated the UK market 10 years ago, other low-
cost wine producers from countries such as Argentina, Chile and South Africa have
benefited from their lower operating costs and rising popularity to compete with
Australian wines in international markets. Poor harvests in France, Spain and Italy in
2017 and South Africa in 2018 boosted Australian export growth in 2017-18. These
countries have similar winemaking reputations to Australia in Asian markets. As a
result, poor harvests in these countries provided an opportunity for Australian wine
producers to fill supply gaps left in export markets.
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The China-Australia Free Trade Agreement (ChAFTA) came into force in December
2015 and, until recently, provided preferential market access for Australian exports
to China. ChAFTA introduced staged reductions in tariffs imposed on industry
exports, increasing the reach of Australian wine producers in the Chinese market.
Tariff rates were 14% in December 2015 and gradually eliminated by January 2019.
The agreement contributed to strong export growth for the industry over most of
the past five years. China overtook traditional export markets such as the United
States and the United Kingdom, becoming the largest consumer of industry
products on a value basis. The COVID-19 outbreak did not significantly affect
exports to China in 2019-20, which remained at similar values to the highs of
2018-19.
However, these gains have now been reversed. In August 2020, China announced
that it was launching separate anti-dumping and countervailing duties
investigations on Australian wine exports to the country. In late November, the
Chinese Government announced that it would be applying anti-dumping duties of
between 107.1% and 212.1% on Australian wine. As a result, importers in China now
have to pay approximately double or triple the usual amount for Australian wine.
Furthermore, in early November, China's Ministry of Commerce directed that no
Australian wine was to pass through customs. Consequently, exports to China
declined dramatically over the remainder of 2020-21, to account for around 23% of
total industry exports. This compares to a 36.7% share in 2019-20. Only $13 million
worth of Australian wine entered the country in the six months to June 2021.
Consequently, demand is expected to fall substantially in the current year. Though,
exports to Hong Kong have increased significantly, partially offsetting the fall in
direct exports to China. While all industry players are expected to lose a
considerable share of revenue as a result, the changes will be particularly difficult
for smaller wine businesses that do not have the ability to switch to new markets as
quickly as some of the larger players.
Imports have fluctuated over the past five years, in line with movements in the
Australian dollar. In particular, imports from New Zealand have remained strong,
accounting for approximately 40% of all imports. New Zealand winemakers benefit
from their ability to claim the WET rebate and keep prices low. The popularity of
wines from the Marlborough region has also supported demand for New Zealand
wines imported by Australian consumers. French imports have also increased over
the past five years, as consumer tastes have shifted towards higher quality wines
and the global supply glut has made French wines more affordable. Demand for
French champagne has risen strongly.
Supply conditions
Rising overseas demand for Australian wine has allowed local

winemakers to recover from structural oversupply at the beginning
of the period.
In response to falling prices over the past decade, many winemakers maintained
profit margins by producing more low-cost bulk wine. The wine equalisation tax
(WET) rebate came into effect in 2000 and provides a rebate on excise taxes for
small wine producers. The WET rebate further encouraged small winemakers to
increase production. This trend initially led to wine production that was otherwise
uneconomical, boosting wine volumes and causing revenue to stagnate and profit
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margins to fall. However, recent price improvements have helped industry profit
margins recover over most of the past five years. This trend encouraged some
growth in enterprise and establishment numbers in some of the past five years.
Restrictions related to controlling the COVID-19 pandemic have negatively affected
industry operators and downstream customers, which reduced enterprise numbers
over the past two years. The impact of China's new trade barriers is likely to
compound the effects of these challenges. Overall, enterprise and establishment
numbers have risen over the five years through 2020-21.
Supermarket power
The increasing dominance of Woolworths and Coles in downstream

liquor retailing is an ongoing concern for wine producers.
Both companies have aggressively increased their presence in the liquor retailing
market over the past five years, expanding their store numbers. Combined, Coles
and Woolworths are estimated to hold almost 65% of the Liquor Retailing industry
in the current. Woolworths and Coles hold significant bargaining power with wine
producers due to their dominance of liquor retailing. The supermarket chains have
also used their market power to reduce shelf space for branded products and push
their own private-label wines. Industry winemakers have complained that the
supermarkets are misleadingly labelling their private-label wines to make them
indistinguishable from branded products.
Historical Performance Data

Year Revenue IVA Estab. Enterprises Employment Exports Imports Wages Domestic
Demand
($m) ($m) (Units) (Units) (Units) ($m) ($m) ($m) ($m)
2013–14 5,810 1,598 2,193 1,918 16,449 2,106 855 1,092 4,559
2014–15 6,108 1,661 2,141 1,897 16,116 2,277 853 1,104 4,684
2015–16 6,906 1,899 2,147 1,905 17,066 2,522 929 1,141 5,313
2016–17 7,158 2,069 2,119 1,889 16,767 2,635 876 1,170 5,399
2017–18 7,829 2,192 2,116 1,890 15,896 3,098 936 1,300 5,667
2018–19 7,710 2,205 2,232 2,011 16,547 3,131 910 1,318 5,488
2019–20 7,627 1,983 2,305 2,082 14,969 3,024 904 1,206 5,508
2020–21 7,190 1,790 2,230 2,009 14,887 2,632 943 1,170 5,500
2021–22 6,945 1,806 2,188 1,954 14,754 2,255 928 1,147 5,618
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Industry Outlook
Outlook Domestic trading conditions for Australian wine producers are
forecast to improve over the next five years, as restrictions related
to controlling the COVID-19 pandemic continue to ease.
However, China's anti-dumping
duties on Australian wine are
projected to constrain overall
industry growth, should they remain
in place. These tariffs are forecast to
initially increase competition in the
domestic market and other more
mature export markets, until new
markets can be developed. This
trend will likely put downward pressure on prices, constraining returns and profit
margins over the next two years in particular. However, many larger wine producers
are projected to shift to premium-branded wine, aiding industry profitability. Overall,
industry revenue is forecast to increase at an annualised 2.5% over the five years
through 2026-27, to $7.9 billion. Large industry operators are anticipated to adopt
further production automation to remain competitive and protect profit margins. As
a result, wages are projected to decline as a share of revenue over the next five
years.
Global landscape
The Chinese Government decided to place anti-dumping duties of

between 107.1% and 212.1% on Australian wine in November 2020.
In late March 2021, the Chinese Ministry of Commerce announced that these would
be imposed for five years. These tariffs are projected to be prohibitive for many
China-based importers. As a result, local wine producers are forecast to be more
reliant on the domestic market and will likely need to develop plans to pivot to new
export markets. However, opportunities in China are not projected to dry up
completely, with some demand likely to remain for well established, premium
products. Customers in China are also likely to source Australian wine indirectly via
importers in Hong Kong.
Given the size of the market in China, wine producers will need to look to multiple
new export markets to recover the losses. Several markets offer potential for
growth. In July 2020, Canada removed several non-tariff barriers on Australian wine,
including a rule which required Australian wine to be kept in restricted areas of
liquor retail outlets. This change is projected to improve export performance in
Canada over the period. Australia's free trade agreements with Japan and South
Korea are also forecast to continue supporting exports. In particular, the market in
South Korea presents high growth potential. Other Asian markets will likely become
increasingly important as sources of export demand for the industry over the
period. Hong Kong has proved
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including Taiwan and Indonesia. However, growing competition from other New
World wine producers that can produce wine more cost effectively, such as Chile,
Argentina and South Africa, will likely constrain the industry's performance. The
Comprehensive and Progressive Agreement for Trans-Pacific Partnership signed by
Australia and 10 other countries from the Asia-Pacific region and the Americas will
likely help Australia compete with these New World producers. In particular, trade
barriers are projected to gradually fall for exports to Mexico, where wine is growing
rapidly in popularity. As a result, industry operators are forecast to focus on
exporting premium, high-quality wines over the next five years.
Supply issues
Prior to the imposition of the anti-dumping duties, the industry was

forecast to face a period of undersupply over the next five years.
Slow declines in global wine production due to poor harvests in key wine producing
countries over the past four years have put pressure on wine inventory levels as
global demand has risen. This factor has increased Australian exports, though the
annual wine grape crush in Australia declined each year from 2018 to 2020.
According to figures from Wine Australia, this trend reduced Australian wine
inventory levels by 4.0% in 2019-20. This was driven by severe drought conditions
and bushfires across Australia. However, labour shortages as a result of COVID-19
notwithstanding, the 2021 wine grape crush was the largest on record.
There has been an increasing trend in households moving to outer urban and
regional areas following the COVID-19 pandemic. This could improve the consumer
market for wine producers in those parts of Australia. Furthermore, the gradual
easing of COVID-19 travel restrictions on both domestic and overseas travellers will
likely encourage renewed participation in the industry. As a result, industry
enterprise and establishment numbers are expected to grow slightly over the next
five years.
Profitability trends
Industry profitability is forecast to grow moderately over the next

five years.
Sales to licensed establishments are expected to recover as restrictions related to
the COVID-19 pandemic are eased. This channel offers higher margins than the
retail channel controlled by the major supermarkets. Small decreases in production
and increases in price are projected to allow producers to expand profit margins
while controlling costs. Wine grape prices are forecast to increase over the next five
years, but this will likely only moderately affect production costs. Higher input costs
are forecast to encourage mid-tier wine producers that are not vertically integrated
to scale back production over the period, limiting supply. The industry's increased
focus on exporting higher value premium wines is also projected to support growth
in profit margins over the next five years.
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Performance Outlook Data

Demand
2022–23 7,224 1,951 2,247 2,014 15,692 2,376 949 1,200 5,797
2023–24 7,373 1,946 2,283 2,031 15,856 2,463 957 1,202 5,867
2024–25 7,587 2,026 2,318 2,065 16,188 2,561 964 1,237 5,989
2025–26 7,708 2,089 2,325 2,051 16,166 2,629 974 1,255 6,053
2026–27 7,867 2,171 2,335 2,059 16,326 2,694 982 1,285 6,155
Industry Life Cycle The life cycle stage of this industry is Mature
LIFE CYCLE REASONS

Exports are growing due to increasing demand for Australian wine in Asian markets
The number of enterprises and establishments have grown slightly over the past five years
The industry faces strong competition from international producers
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The Wine Production industry is in the mature phase of its life cycle. Industry value
added, which measures an industry's contribution to the overall economy, is
forecast to grow at an annualised 0.5% over the 10 years through 2026-27. This
represents an underperformance of the overall economy, which is projected to grow
at an annualised 2.2% over the same period. Over the past five years, the number of
enterprises and establishments in the industry have grown slightly, but the merger
and acquisition market has been active. These trends are indicative of a mature
industry. While some new products have entered the market as producers have
benefited from changing consumer trends, firms have also increasingly focused on
improving operating efficiencies and minimising costs.
Rising export demand and a consumer shift towards premiumisation had driven the
industry's growth over the three years through 2019-20. This was supported by a
depreciation of the Australian dollar. However, heavy tariffs introduced by China in
November 2020 have resulted in overall falls in export revenue and total industry
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revenue over the past five years. International competition has also risen from other
New World wine producers such as Chile, South Africa, Argentina and New Zealand.
Growing demand is expected from developing Asian countries such as Indonesia,

as well as some more mature markets such as the United Kingdom. A pending free
trade agreement between Australia and the United Kingdom will eliminate tariffs on
Australian wine. The industry has also increased its marketing in efforts there and
in other countries following the imposition of anti-dumping duties in excess of
100% and even 200% in some cases. Domestic demand favouring premium
products is also expected to boost industry growth.
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Products and Markets

Supply Chain KEY BUYING INDUSTRIES KEY SELLING INDUSTRIES
1st Tier 1st Tier
Liquor Wholesaling in Australia Grape Growing in Australia
Fruit and Vegetable Processing in
2nd Tier Australia
Casinos in Australia Flour and Grain Mill Product
Hotels and Resorts in Australia Manufacturing in Australia
Liquor Retailing in Australia Paperboard Container Manufacturing in

Australia
Pubs, Bars and Nightclubs in Australia
Glass and Glass Product Manufacturing in
Australia
2nd Tier
Nursery Production in Australia
Livestock and Other Agricultural Supplies
Wholesaling in Australia
Industrial and Agricultural Chemical
Product Wholesaling in Australia
Products and
Services
Industry players produce red wine, white wine, cider and other wines
and alcoholic beverages.
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Red and white wines account for most of the industry's production, making up over
90 of industry revenue in the current year. Cider and other wines and alcoholic
beverages make up the remainder of the industry's products. The COVID-19
outbreak is expected to limit demand for industry products in the current year, with
on-premise consumption expected to fall both locally and abroad.
Red wine
Red wine represents the largest share of industry revenue.

Red wines account for a greater proportion of industry revenue than white wines,
despite similar production and sales volumes, due to the higher prices they attract
and stronger demand in export markets. The production process for creating red
wines is more complicated and cost-intensive than for white wines.
Australia is renowned for producing some of the best shiraz in the world. Shiraz
grapes consequently account for almost one-quarter of all grapes planted in
Australia. Traditional shiraz-producing regions include the Barossa Valley, Clare
Valley and McLaren Vale in South Australia, Heathcote in Victoria, and the Margaret
River region in Western Australia. The range of production sites, in addition to the
full-bodied and fruity flavour of the wine produced, has aided the ongoing popularity
of Australian shiraz. Cabernet sauvignon is the second-largest red wine variety
produced in Australia. Despite its large production volume, its high tannin
concentration and strong taste have led many drinkers to switch to lighter red
varieties. Merlot production has grown over the past five years. This wine has
remained popular due to its lower tannin concentration and easy drinking taste
compared with heavier varieties.
Red wine producers have benefited from trends favouring premiumisation as well
as rising exports to China over the three years through 2019-20. However, red wine
has fallen overall as a share of industry revenue over the past five years, due to the
sharp fall in demand from China following the imposition of tariffs in November
2020. Red wine accounts for over 95% of all wine exported to China. Increased
production and sales of other segments, such as sparkling wines have also
constrained this segment's share of revenue.
White wine
While the production of white wine grapes accounts for nearly half
of the total wine grapes produced, white wine accounts for a lower
share of revenue compared with red wine.
This difference is largely due to the relative ease of producing white wines
compared with red varieties, which makes white wines cheaper in comparison.
Their lower price tag has helped white wines remain popular among Australian
drinkers and in export markets over the past five years. Consequently, white wine
has grown as a proportion of industry revenue over the period.
Chardonnay is the second most common wine produced in Australia. However,

chardonnay has declined in popularity over the past five years, with many women
and younger wine drinkers opting for lighter and more fashionable white wines such
as sauvignon blanc and pinot gris. As a result, these two varieties represent some
22 IBISWorld.com
of the fastest growing white wines. Chardonnay production is forecast to slow over
the long term, as drinkers switch to other white varieties. Sauvignon blanc is the
second-largest white variety to be produced in Australia. Domestic sauvignon blanc
production has steadily increased over the past five years, as surging demand for
popular New Zealand sauvignon blanc has prompted local wineries to try to
emulate their success. Other prominent white varieties include pinot gris, pinot
grigio and semillon, which represent a growing proportion of grapes and therefore
wines being produced. This growing proportion is largely due to an overproduction
of red varieties and the growing popularity of the lighter white wines.
Cider
Cider, which includes perry, accounts for an estimated 4.0% of

industry revenue.
Cider is preferred by some consumers as a refreshing alternative to beer. However,
demand for cider in Australia has declined over the past five years. Consequently,
this segment has declined as share of revenue over the period. Though, this has
been partially mitigated by a rise in demand for Australian cider in export markets.
Other wines and alcoholic beverages
Other alcoholic beverages in the industry include sparkling wine,

mead, and fortified and unfortified niche wines such as sherry.
The sparkling wine segment has grown as a share of industry revenue over the past
five years. Consumers often perceive sparkling wines as a traditionally celebratory
drink, and as an everyday alcoholic beverage that can be consumed casually or with
meals. The growing popularity of French champagnes have driven this trend, as
they are often perceived as premium and sophisticated. In response to growing
demand for these imports, Australian winemakers have stepped up their production
of prosecco and cava, which have become increasingly popular over the past five
years. The sparkling wine segment is expected to perform strongly over the next
five years, as industry operators respond to growing demand for sparkling wines
and champagne.
Other products such as fortified wine and mead have remained a niche part of the
industry over the past five years, as consumers have generally preferred red or
white wines. These varieties have struggled to gain popularity due to the expanding
range of red and white wines in the industry. However, this product segment has
remained stable as a share of industry revenue over the past five years, due a
greater fall in the red wine segment.
Demand The Wine Production industry relies heavily on export activity.

Determinants
Trends in key export markets such as China, the United Kingdom and the United
States significantly influence industry demand. Nevertheless, domestic factors also
play an important role in determining wine consumption and demand. The
COVID-19 pandemic has impacted demand for wine both locally and abroad.
Reduced demand, especially from on-premise consumption purposes such as in
23 IBISWorld.com
bars and restaurants, has had a negative impact on the industry. Global trade
disruptions due to the outbreak have also impacted the industry.
Discretionary income and consumer sentiment
Typically, higher discretionary income allows consumers to spend

more on non-essential products, such as wine.
Higher incomes can also contribute to a consumer shift to more premium products.
Growth in discretionary income over the past five years has encouraged more
people to eat out, increasing demand for wine from restaurants. However, this has
been curtailed by COVID-19 due to social distancing restrictions and the impact on
discretionary incomes. Consumer sentiment also dictates changes in discretionary
spending. Consumer sentiment has been volatile over the past five years,
fluctuating witch changing perception regarding household finances and the
certainty or uncertainty surrounding economic growth. Consumer sentiment
plunged further following the outbreak of COVID-19 and oscillated based on the
changing restrictions around the country.
Prices and exchange rates
Wine consumption in Australia has been boosted by the favourable

cost of wine relative to the price of beer over the past five years.
In part, this resulted from the relatively favourable tax treatment of wine. The
cheaper price of wine has helped increase demand for industry products. However,
the export-oriented nature of the industry means that exchange rates are also an
important determinant of demand, along with income and general economic
conditions in key overseas markets. Over the past five years, the value of the
Australian dollar has fallen relative to its major trade partners, making Australian
products more cost-competitive in key export markets.
Consumer trends
Wine, cider and other alcoholic beverages produced by the industry

are substitutes for beer and spirits.
Consequently, demand for industry products depends on their appeal relative to
beer and spirits. Consumer preferences are influenced by marketing and beverage
taste. Over the past five years, demand for cider has declined following new trends
favouring the consumption of spirits and spirit-based beverages. Additionally, wine
consumption trends, such as young female drinkers increasingly favouring lighter
wines, affect how wine is consumed.
Health consciousness and consumption
Wine consumption, particularly in moderation, has often been seen

as an alternative to other alcoholic beverages.
Wine consumption is used as a digestive or sleeping aid by some people. In
contrast, the consumption of beer and spirits is often seen as less healthy in
24 IBISWorld.com
comparison with wine, especially given the high calorie content of beer and strong
alcohol content of spirits. As health-consciousness increases, consumers are more
likely to substitute beer and spirits consumption with wine.
Major Markets
The Wine Production industry generates revenue from both domestic and export
markets. Domestic markets have been further divided into domestic wholesalers,
major retailers and other markets. While changing consumer trends away from
alcohol have constrained domestic consumption, exports have grown as a share of
domestic demand over the past five years.
Export markets
Export markets account for the largest share of industry revenue. Export markets
grew as a share of industry revenue over much of the past five years, due to a
weaker Australian dollar, several free trade agreements, rising prices, and increasing
incomes in China driving demand for Australian wine in Asian markets. In 2016-17,
China overtook the United States as the largest export destination for Australian
wine by value. However, the lucrative nature of this market has changed over the
past two years. In August 2020, China announced anti-dumping and countervailing
duties investigations into several Australian companies. Then, in late November
2020, China placed anti-dumping duties of between 107.1% and 212.1%, making
industry products prohibitively expensive for many importers and downstream
consumers. As a result, revenue from export markets is expected to decline
substantially over the two years through 2021-22, reducing exports as a share of
revenue over the past five years.
Recently signed free trade agreements are anticipated to contribute to ongoing

export growth over the next five years. For example, the Comprehensive and
Progressive Agreement for Trans-Pacific Partnership, was signed in 2018 by 11
25 IBISWorld.com
nations and provides a multi-year staged reduction in tariffs. This free trade
agreement provides Australia with an advantage over other wine exporting
countries, for which tariffs still apply. The United Kingdom and Canada are also
major destinations for industry exports. Recently removed trade barriers in Canada
are expected to aid export sales to that country. Export markets are particularly
important for larger companies and typically make up a greater proportion of their
sales. The COVID-19 outbreak is anticipated to supress demand for Australian wine
over the two years through 2020-21, due to trade disruptions and lower
consumption abroad, especially for on-premise consumption.
Domestic wholesalers
Domestic wholesale wine merchants are a vital market for the industry.
Wholesalers purchase wine from producers to distribute to liquor retailers, pubs,
restaurants and other hospitality venues. This market also distributes to
supermarkets, although this is usually restricted to niche wines. The domestic
wholesale market has declined as a proportion of industry revenue over the past
five years, due to consolidation in liquor retailing. Large retail chains, such as those
owned by Woolworths and Coles, have increasingly avoided the wholesale market
through wholesale bypass and sold their own private-label wines. Downstream
demand from pubs, bars, nightclubs and restaurants has fallen considerably over
the past two years, due to the range of restrictions put in place following the
COVID-19 outbreak.
Major retailers
Major retailers are those included in a national liquor retailing network. Downstream
liquor retailing is becoming more consolidated, leading to an increasing proportion
of direct sales to retailers over the past five years. Coles' portfolio includes
Liquorland, Vintage Cellars and First Choice Liquor, while Woolworths operates
BWS, Cellarmasters, Dan Murphy's and Langton's. The purchasing power of these
retailers has grown significantly over the period. Their rising share of the liquor
retailing market has increased the volume of industry sales being made directly to
retailers, rather than through wholesalers. Retail sales of alcohol, including wine has
grown strongly since the outbreak of COVID-19. This was sparked by the shutdown
of licensed establishments, and have remained elevated while capacity and travel
restrictions remain in-place. As a result of this and the decline in exports in the
current year, this market has grown as a share of revenue over the past five years.
Other markets
Other markets consist of pubs, bars and nightclubs, and niche markets, such as
direct-to-consumer sales, online markets, caterers and businesses. Pub, bars and
nightclubs acquire industry products to sell to customers. Over the past five years,
overall demand from pubs, bars and nightclubs has declined, with COVID-19
restrictions severely hampering these businesses' ability to trade. However, direct
online purchases of wine from producers have increased. Online sales are
undertaken both by wineries as part of their direct-to-consumer sales, and by
wholesalers and retailers to expand their distribution networks. Some major
industry players operate their own direct sales distribution through mail orders or
site visitations to bypass downstream distributors. Small wine businesses have
grown significantly over the past five years. Consumers have been drawn to
boutique cellar doors for the experience, where they can taste a range of wines,
26 IBISWorld.com
meet the winemaker, and understand how and where the wine is produced. As a
result, other markets have generated a growing share of industry revenue over the
past five years. Online direct to consumer sales have been a key sales channel for
industry operators following the COVID-19 outbreak, growing strongly over the past
three years.
While cellar-door sales and wine tourism make up a small proportion of industry
sales, they are a particularly important market for smaller producers and premium
wine manufacturers. Although larger manufacturers make proportionally fewer
cellar-door sales, many large wineries maintain a presence in this market. For
example, Treasury Wine Estates has multiple wineries open to the public. These
wineries are often accompanied by a restaurant or cafe where customers can
purchase wines on site, helping to promote brand awareness and boost direct
sales. However, wine tourism has fallen significantly over the past three years due
to the COVID-19 travel and social distancing restrictions. As a result, demand for
wine through the cellar door channel has declined over the past five years.
International Exports in this industry are High and Decreasing

Trade
Imports in this industry are Medium and Increasing
Australians consume less wine on a

per capita basis than other major
wine producing countries such as
France, Portugal and Italy. Given
Australians' relatively moderate
consumption of wine and the
country's small domestic market,
international markets represent an
important source of revenue for
Australian producers. In particular,
large producers rely on international
trade, with exports often contributing
a larger proportion of their revenue
than small producers.
Australia currently has two wine-

specific trade agreements. The
Agreement Between Australia and
the European Community on Trade in
Wine allows Australia improved
access to European markets in
exchange for the phasing out of
European wine names for wine
produced in Australia. The
Agreement on Mutual Acceptance of Oenological Practices between Australia, New
Zealand, Chile, Argentina, South Africa, Canada and the United States ensures
Australian wine can be marketed in the participating countries, so long as it meets
Australian winemaking standards. This agreement guarantees that signatory
countries will not use differences in production standards as a technical barrier to
27 IBISWorld.com
trade in wine. The preferential tariff rates for Australian wine in large export markets
have contributed to the growing demand for industry products.
Exports
Industry exports are expected to fall at an annualised 13.12% over the five years
through 20210-221, to account for 325.58% of industry revenue. By value, the top
wine export destinations are the United States, China, the United Kingdom and
Canada. Over the past decade, relatively new wine producing countries such as
Chile and South Africa have emerged to challenge Australian wine in key export
markets. These countries generally produce wine at a lower cost than Australian
producers, allowing them to sell their goods in large markets like Europe and North
America for a lower price. To counter these challenges, Australian wine producers
have progressively marketed their products as high-quality wine to capture
premium prices. This strategy has largely been successful, with industry exports
having grown significantly over the three years through 2019-20.
This strong performance was also attributable to the substantial rise in demand
from China. Australia signed three free trade agreements (FTAs) with several
countries in Asia in 2014 and 2015, including one with China. Wine exports to China
grew significantly following the signing of the China-Australia Free Trade
Agreement, as tariffs were gradually phased out between 2015 and 2019. Rising
middle-class incomes in China also contributed to strong demand growth over the
period. However, the Chinese government imposed tariffs exceeding 100% and
200%, effective from 28 November 2020, which have are expected to substantially
reduced demand from China. Consequently, China is likely to fall below the United
States as the second largest export destination for industry products. Demand was
elevated between August and October following the Chinese Government's
announcement of anti-dumping and countervailing duties investigations, with some
form of trade barrier widely expected as a likely outcome. In March 2021, the
Chinese government announced these tariffs would be in place for at least five
years.
The relatively weak Australian dollar supported demand from North American
markets, which contributed to growth in industry exports earlier in the period.
However, trade disruptions, government restrictions and economic impacts related
to the COVID-19 outbreak are expected to constrain demand from overseas over the
two years through 2020-21.
Rising exports to Asia are forecast to support a recovery in exports over the next
five years. The FTAs signed in 2014 and 2015 with Japan and South Korea are
forecast to lead to new export growth in Asian markets, as Australian wines
become more competitive with the reduction or removal of tariffs. The South
Korean FTA removed all tariffs for Australian wine exports and the elimination of
tariffs under the Chinese FTA was completed in January 2019. Tariffs are still being
gradually reduced under the Japan FTA. This process has been extended under the
new Comprehensive and Progressive Trans-Pacific Partnership, with the final
reduction to take place in April 2025. These markets will provide new avenues for
growth, with the potential for increased penetration of these markets by Australian
wines. In July 2020, Canada removed several non-tariff trade barriers on Australian
wine, including extra taxes, mark-ups and rules that limited the visibility and shelf
space of imported wine. These changes will likely allow exporters to improve sales
28 IBISWorld.com
to this market in the current year and the next five years. Additionally, following the
imposition of tariffs by China, demand from Hong Kong has increased significantly.
Australia's third largest industry export market by value is the United Kingdom. In
anticipation of the United Kingdom withdrawing from the European Union, the
Australian and UK governments signed a new agreement on wine in January 2019
that will retain the provisions currently in place between the countries under the
current Australia-European Community on Trade in Wine Agreement. In June 2021,
Australia and the United Kingdom announced an in-principle agreement on core
tenets of a free-trade deal. Once this deal comes into effect, all tariffs on Australian
wine will be eliminated.
Imports
Wine imports have grown slightly over the past five years. Industry imports are
expected to rise at an annualised 10.24% over the five years through 20210-221, to
account for 168.52% of domestic demand. Imports were not materially affected by
the outbreak of COVID-19 in 2019-20. The latest import data shows strong growth
in imports from New Zealand over much of 20the four months through
20-21October. However, the next three largest countries of origin for Australian
wine, France, Italy and Spain, have all suffered large outbreaks of COVID-19,
impacting their wine grape harvests.
Changing consumer preferences and fluctuations in domestic production have both

influenced import growth over the past five years. Imports from New Zealand fell at
the start of the period but have continued to rise from 2018-19 onwards. fallen both
as a share of revenue and in real terms over the past five years, largely due to a fall
in demand for white table wine. However, the extension of the wine equalisation tax
rebate to New Zealand-based winemakers has supported imports from New
Zealand. France has traditionally been another significant source of imports due to
the popularity of vintage wines and the Bordeaux wine region. Demand for wines
from France, particularly champagne, has increased substantially over the past five
years. Italy and Spain are also notable sources of foreign wines.
29 IBISWorld.com
Business
Locations Business Concentration in Australia
NT
QLD
WA
SA
NSW
ACT
VIC
Percentage of Enterprises (%)

TAS
0 11 22 33
Wine Production in Australia
Source: IBISWorld
Australia has over 60 designated wine-producing regions. The geographic spread of

the industry is closely correlated with the distribution of wine grape production, with
most wine producers residing in the south-east of the country. Wine production
facilities are typically located at or near vineyards to minimise transport costs and
ensure grapes are crushed shortly after harvest. For the cider segment, a large
proportion of establishments are in Victoria and New South Wales, due to the cool
climate required for stone-fruit growing.
South Australia dominates the Wine Production industry and contributes

considerably to the state's gross domestic output. In South Australia, wineries are
concentrated in the south-east of the state, throughout the Barossa Valley, McLaren
Vale, Clare Valley, Coonawarra, Eden Valley and Adelaide Hills regions. The Barossa
Valley is Australia's most famous wine region and produces some of the world's
most well-regarded shiraz.
Victoria is the second most important wine producing region in the country.
Victorian wineries are mainly located in the warm, high rainfall regions along the
Murray River. The Yarra Valley and Mornington Peninsula are highly regarded
premium cool climate wine regions, predominantly producing pinot noir and
30 IBISWorld.com
chardonnay. The state's other major wine producing regions are Heathcote, the
Western District, Rutherglen and Beechworth.
New South Wales has 14 distinct wine regions that represent a diverse range of
growing conditions. In the early 1800s, the Hunter Valley was one of the first wine
grape growing regions to be cultivated in Australia. Hunter Valley semillon is world
class, while the cooler climate also produces distinctive shiraz and chardonnay.
In Western Australia, the grape growing regions south of Perth have become
popular for winery development. The most renowned is Margaret River, with the
largest being the Great Southern region. Western Australia's oldest winemaking
region, the Swan Valley, is north of Perth.
31 IBISWorld.com
Competitive Landscape
Market Share Concentration in this industry is Low
Concentration
The Wine Production industry has low
market share concentration. The four
largest Australian wine producers
collectively account for an estimated
34.3% of industry revenue in 2021-22.
Industry concentration has fluctuated over
the past decade, as major producers have
purchased and then divested certain
production facilities, such as Treasury
Wine Estates' acquisition of the White Hills
vineyard in Tasmania and Accolade Wines'
acquisition of Grant Burge Wines in South
Australia. The industry's market share
concentration has declined over the past
five years, due to strong growth among
small wine producers.
The current structure of the wine equalisation tax (WET) discourages consolidation
among smaller firms in the industry. Smaller players struggle to maintain profit
margins, and would benefit from the economies of scale and increased negotiating
power that would result from merging with other winemakers. However, the WET
rebate, which many smaller businesses rely on to remain viable, fell from $500,000
to $350,000 in July 2018. Merging operations therefore effectively incurs a cost
through the loss of a portion of this rebate.
32 IBISWorld.com
Key Success IBISWorld identifies 250 Key Success Factors for a business. The most important for this
Factors industry are:
Production of goods currently favoured by the market: Industry firms must be able to
switch production to cater for changing tastes. Industry wine-tasting awards are an
effective means of marketing wines to consumers.
Supply contracts in place for key inputs: Contracts help ensure a steady supply of
specific grape varieties that are produced into wine. A steady supply of grapes can
contribute to strong relationships with downstream retailers, which are themselves looking
for reliable suppliers.
Establishment of export markets: Strong ties to export markets have been a critical
growth factor for wine producers over the past five years. Establishing a strong reputation in
emerging Asian markets is important for the future success of the Australian wine sector.
Financial structure of the company: The extent of a company's debt and the way in
which it is financed will affect its ability to acquire new vineyards or winery equipment and
ensure healthy cashflow.
Economies of scale: Wine producers with larger production facilities can achieve lower
per unit costs, which can enable lower pricing, increased marketing expenditure or greater
capital investment.
33 IBISWorld.com
Cost Structure
Benchmarks
Profit
Profit margins vary according to each operators'

size and the type of products produced.
Typically, major wine producers benefit from
economies of scale, and greater negotiation
power with downstream wholesalers and
retailers. However, industry players have faced
challenging conditions over the past five years,
as supermarkets in downstream retail markets
have increased their negotiation power. Coles
and Woolworths are expected to hold over 60%
market share in the Liquor Retailing industry,
giving them significant bargaining power in
negotiations with wine producers. These
retailers have also increasingly expanded their
private-label range, which has constrained
revenue growth. While a falling national wine
supply over the three years through 2019-20
(latest data available) and rising premiumisation
trends have helped ease some of these cost
pressures. Though, as the 2021 wine grape
harvest was the largest on record, this may
34 IBISWorld.com
boost wine inventory levels by the end of

2021-22. Issues surrounding oversupply are also
likely to be influenced by a couple of external
factors.
Continuing impacts from the COVID-19

pandemic and the collapse in demand from
China as result of new anti-dumping duties are
expected to significantly impact profit margins,
seeing them decline as a share of revenue over
the past five years. COVID-19 has disrupted the
operations of some winemakers over the past
three years and forced and change in the sales
mix in downstream markets. Sales to licensed
venues have declined due to government
restrictions on these establishments. These
venues are higher margin customers than
retailers. Though, an even greater impact has
come from the loss of sales to China. Sales of
wine to China have overwhelmingly favoured the
premium end of the market in recent years, with
the average per litre cost now around $9.00.
While there had been some expectation within
the industry that tariffs were imminent, this
decision will likely have left a large number of
producers with excess stock. Though, as the
vast majority of industry exports to China are
red wine, red wine grape prices have fallen,
which likely assist in easing purchase costs for
the industry.
Wages
The Wine Production industry is highly capital-

intensive. However, wages still make up a
significant share of revenue, especially for
smaller winemakers. Labour is required for
manual tasks, such as production and
transportation, and for highly specialised tasks
involving planning and management of vintage
wine batches. Despite increased automation in
production processes to improve profit margins,
wages have risen as a share of revenue,
primarily due to the fall in revenue over the past
three years.
35 IBISWorld.com
Purchases
Purchases are the industry's largest cost and

can differ year on year, depending on variations
in key input prices. Vertically integrated wine
producers, which own their vineyards, can
benefit from cheaper access to wine grapes.
Prices can vary in a season, with price often
determined by existing supply contracts and the
bargaining power of growers, but also due to the
changes in supply caused by variable weather
conditions. Prices for grapes purchased early in
the season tend to be higher, as winemakers
acquire the grapes necessary to meet supply
contracts. However, grapes purchased late in
the season are often bought at discounted
prices and are mainly used for bulk wines. Other
purchase costs include containers, bottles and
packaging materials; wine for blending,
fortification or distillation; grape juice and grape
spirit; sugar; and other inputs.. The COVID-19
outbreak has placed upward pressure on
purchase costs and the tariff decision by China
is expected to lead many wineries with excess
stock. Despite this, improved operating
efficiencies, and a fall in wine grape prices over
the past two years are expected to contribute to
a fall in purchase costs over the five years
through 2021-22.
Depreciation
Depreciation costs are higher in the industry

than in other industries across the Beverage
Manufacturing subdivision. This trend is largely
due to the greater costs involved in wine
maturation and storage compared with other
beverages, such as beer. Increased production
of bulk wines, which tend to have more capital-
intensive production lines, has boosted total
depreciation expenses. However, depreciation
36 IBISWorld.com
has fallen as a share of revenue from a high

base over the past five years.
Other Costs
Other costs in the industry include rent, utilities,

marketing, repair and maintenance and other
administrative costs. Industry rent costs are
minor, with some winemakers owning their
property, but have risen as a share of industry
revenue over the past five years. Utility costs,
particularly electricity for powering machinery
and temperature-controlled storage facilities,
have increased as a share of revenue over the
past five years, largely due to the fall in revenue.
Some of the largest industry firms that sell
branded and premium products spend
significant amounts of money on marketing.
Marketing has grown as a share of industry
revenue over the past five years, as promotional
spending on Australian wineries has increased,
particularly as producers have been looking for
new markets following the imposition of tariffs
by China.
Basis of Competition in this industry is High and Increasing

Competition
The Wine Production industry is highly competitive.
Over the past five years, industry competition has increased due to growing
international competition. Wine producers are also subject to rising competition
from cleanskin wines due to the increasing distribution power of supermarkets in
downstream retail markets.
Internal competition
Wine producers in the mid- to high-price bottled products range

compete on the basis of quality and branding.
37 IBISWorld.com
Wine shows and awards are an important means of promoting the quality of
particular wines. Marketing and branding activities can also contribute to consumer
perceptions of quality. By volume, industry sales are dominated by bulk wines,
which compete primarily on the basis of price. Given the importance of price, the
size of a wine producer is playing an increasingly important role in competition due
to the advantages offered by having greater economies of scale and scope.
Over the past five years, Australian wine producers have tried to build a reputation
as high-quality wine producers. International retail groups are among the major
purchasers of Australian wines, making successful product promotion important.
The four largest Australian winemakers, Treasury Wine Estates, Pernod Ricard
Winemakers, Casella Wines and Accolade Wines are the largest contributors to
Australia's total export volume. These companies, which have access to global
distribution channels, are able to spend significantly on marketing and have capital
available to acquire overseas assets. For example, Treasury Wine Estates has
created a direct wine sales business to help build global distribution channels.
External competition
External competition has been increasing over the past five years
due to the introduction of additional premium and boutique beer
brands.
They compete directly against wine and cider. Wine also faces competition from
spirits and, to a lesser degree, non-alcoholic beverages. Cider and other alcoholic
beverages are facing stronger competition from traditional beer and ready-to-drink
alcoholic beverages. Craft beers, which have grown rapidly in popularity over the
past five years, have also increased competition for industry products. However, the
growing popularity of cider and sparkling wines has partially shielded them from
this competition.
Import penetration has grown over the past five years, increasing the level of
external competition. However, Australian wineries have several advantages over
international competitors due to a concentration of professional expertise,
favourable climatic conditions and low-cost supply of grapes. The industry also
benefits from the network of related industries in Australia, including tourism and
hospitality. On the other hand, the industry competes with imported wine on price,
with Australian wine producers facing increased external competition from other
New World wine producers such as Chile, South Africa, the United States and New
Zealand. These New World wine producers also compete with Australian producers
for sales abroad in key export markets.
Barriers to Entry Barriers to entry in this industry are Medium and Increasing
38 IBISWorld.com
The Wine Production industry has

moderate barriers to entry and these Barriers to entry checklist
have increased over the past five years. Competition High
Enterprise numbers have remained
Concentration Low
largely stable over the period, which is
indicative of moderate barriers to entry. Life Cycle Stage Mature
The market saturation already achieved
Technology Change Medium
by the industry's largest players, mid-tier
firms and small independent wineries Regulation & Policy Medium
means that successful entry by new
Industry Assistance Medium
players can be difficult. New entrants
can find it challenging to achieve the
scale and establish the distribution networks necessary to compete against the
large players. Consequently, barriers to entry are expected to remain moderate.
Capital requirements for the industry are significant, although operation on a small
scale is possible. As some large wine companies divest parts of their operations,
these become available for purchase by any potential new entrants. New entrants
typically require superior financial management skills and industry-specific
knowledge to be successful.
Branding has become imperative for success in the industry, especially for cider,
with an increasing number of boutique producers making product differentiation
important. The variety of wine brands in the Australian industry has also rocketed,
with consumers typically choosing a brand they are familiar with, seeking reliability
of quality and a consistent taste. The widening array of brands available
domestically and abroad represents an increasing barrier to entry. Early movers
have an advantage over later entrants in this regard as early participants in each
product segment have had more time to establish brand awareness.
An oversupply of wine grapes prior to the start of the period also created a barrier
to entry. Excessive wine grape production during the 2000s contributed to a supply
glut of wine by the early 2010s. However, the industry recovered from this glut in
2016-17, which has negatively affected wine prices and industry revenue over the
period. This has also discouraged new wine producers from entering the market
over the period.
Industry Globalization in this industry High and Increasing

Globalization
The Wine Production industry is characterised by a high level of globalisation. Key
industry operators have heavy ties with foreign-owned enterprises and are exposed
to shifts in international markets. This is particularly evident with large, multi-
discipline beverage manufacturers such as Lion and Asahi making inroads in cider
manufacturing. The industry's globalisation is also supported by a high level of
international trade. Import penetration has increased over the past five years and
Australia is a major wine exporter in the world by value.
Foreign ownership in the industry is high. For example, major player Pernod Ricard
Australia is a subsidiary of French company Pernod Ricard SA. Several other French
companies, including major producers Bollinger and Roederer, have increased their
presence in Australia, while prominent sparkling wine producers Domaine Chandon
39 IBISWorld.com
in the Yarra Valley are wholly owned by French company Moet et Chandon. The
major cider producers are multinational companies; Asahi Holdings and Lion, which
is wholly owned by Japanese brewer Kirin Holdings. In addition, Netherlands-based
beer manufacturer, Heineken N.V entered the industry in May 2021. The company
acquired the Strongbow, Bonamy's and Little Green brands. These were previously
owned by Carlton & United Breweries CUB), but were forced to be divested by the
ACCC, following Asahi's acquisition of CUB in June 2020.
Major players in the Wine Production industry are also active investors globally.
Treasury Wine Estates owns several wineries in the United States, Italy, France and
New Zealand. Furthermore, Pernod Ricard have wine production facilities
throughout the world. In January 2016, Treasury Wine Estates also acquired the US
winemaking business of Diageo.
40 IBISWorld.com
Major Companies
Major Players TREASURY WINE ESTATES LIMITED
Market Share: 13.5%

Treasury Wine Estates Limited (TWE) is an
Australian-owned producer and distributor of
wine with global operations. In 2010, Foster's
Group separated its wine and beer assets,
creating TWE. After its demerger, TWE became one of the world's largest wine
producers, with vineyards across Australia, New Zealand, the United States and
41 IBISWorld.com
Italy. The company's brands include Penfolds, Lindeman's, Wolf Blass, Rosemount
Estate, Beringer Vineyards and Matura.
TWE attributes much of its success to its diverse global operations. The strategic
placement of operations around the world allows TWE to hedge its performance
between regions. TWE's general trend towards premium products, along with its
luxury and boutique wines throughout Asia and the United States, has strengthened
its position as a global wine manufacturer. In mid-2013, TWE purchased the White
Hills vineyard in Tasmania, which formerly belonged to Brown Brothers, to further
grow the company's profile as an exclusive, high-quality brand. Despite challenging
market conditions, the company has continued to look for expansion opportunities
through international acquisitions. In January 2016, it acquired the wine business of
Diageo for a reported $754.0 million. This acquisition included several US brands,
winemaking operations and commercial wine assets in the United Kingdom.
Financial performance
Treasury Wine Estates Limited's industry-specific revenue is expected to grow at an

annualised 2.0% over the five years through 2021-22, to $937.0 million. This
represents an outperformance of the industry over the period. This is due largely to
increased demand from China at the start of the period, and other parts of Asia.
Demand in China has increasingly favoured premium brands, boosting sales further.
Prior to the imposition of tariffs, Penfolds and Wolf Blass accounted for
approximately 40% of all industry exports to China. However, a shift in corporate
strategy and reset of the business has contributed to subdued revenue growth in
the domestic market over the period. The COVID-19 outbreak initially affected sales
to China and has had a longer term impact domestically, due to restrictions on
licensed establishments and travel. Though, revenue declined substantially in
2020-21 due largely to the 169.3% anti-dumping duty placed on the company's wine
in China.
Treasury Wine Estates Limited - industry segment performance*

Year Revenue Growth
($m) (% change)
2011-12 612.2 N/C
2012-13 652.9 6.6
2013-14 596.0 -8.7
2014-15 655.6 10.0
2015-16 736.9 12.4
2016-17 848.0 15.1
2017-18 1049.3 23.7
2018-19 1129.2 7.6
2019-20 1054.6 -6.6
2020-21 918.2 -12.9
2021-22 937.0 2.0
Source: IBISWorld
Note: *Estimate
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CASELLA WINES PTY LIMITED
Market Share: 7.7%

Casella Wines Pty Limited is a family owned
winery established in Australia in 1965 in the
Riverina region of New South Wales. The
company, headquartered in Yenda, NSW,
operates solely in Australia. Over the past five years, Casella Wines has expanded
its acquisition strategy, purchasing several vineyards and wineries across Australia.
In 2014, Casella Wines bought out Peter Lehmann Wines, a family-run business in
South Australia's Barossa Valley, for approximately $57 million. In 2015, Casella
Wines purchased Brand's Laira in the Coonawarra region. In 2016, Casella Wines
purchased Howcroft Estate Vineyard in South Australia and Victorian fortified wine
producer Morris Wines. In 2018, the company bought further assets in South
Australia, acquiring the Tullymore Estate in the Clare Valley.
Casella Wines' brands include Yellow Tail and Casella 1919. The company is one of
Australia's largest exporters of wine, and is best known for its Yellow Tail brand's
market penetration in the US wine market. Since launching in 2001, Yellow Tail has
become the highest selling imported wine in the United States. As a result, the
Australian dollar's depreciation over most of the past five years has benefited the
company's performance, supporting its profit margins. Casella Wines has
performed well despite difficult trading conditions, largely due to its marketing and
brand positioning.
Casella Wines' revenue is expected to grow at an annualised 2.7% over the five
years through 2021-22, to $535.9 million. This represents an outperformance of the
overall industry in nominal terms. The company's revenue grew strongly at the
beginning of the period, following several acquisitions. Revenue growth at the start
of the period, as export revenue from the United States has declined. An oversupply
of wine and heavy discounting in the US market have dampened demand and
revenue from the market. However, the company significantly outperformed the
wider industry in 2019-20, when consumer panic buying at the start of the COVID-19
outbreak saw strong sales of its Yellow Tail brand. Sustained high levels of retail
sales and growth in exports to the United States have supported revenue growth
throughout the pandemic. Reduced sales to China following the imposition of tariffs
are not expected to significantly affect Casella's performance, as exports to China
only account for approximately 3% of sales. The company has maintained higher
than average industry profit margins over the past five years, but has followed a
similar downward trend.
Casella Wines Pty Limited - financial performance

Year Revenue Growth
($m) (% change)
2011-12 325.6 N/C
2012-13 334.3 2.7
2013-14 367.3 9.9
2014-15 394.1 7.3
2015-16 453.7 15.1
2016-17 468.4 3.2
2017-18 473.5 1.1
2018-19 483.4 2.1
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Casella Wines Pty Limited - financial performance

Year Revenue Growth
($m) (% change)
2019-20 518.9 7.3
2020-21* 530.2 2.2
2021-22* 535.9 1.1
Source: Annual Report and IBISWorld
Note: *Estimate
PERNOD RICARD PACIFIC HOLDING

PTY LTD
Market Share: 7%
Pernod Ricard Pacific Holding Pty Ltd, trading
as Pernod Ricard Australia, is the Australian
subsidiary of France-based spirits and wine giant Pernod Ricard SA. In 1989 and
1990, Pernod Ricard acquired Orlando Wines and Wyndham Estate, and merged the
two entities into Orlando Wyndham Group (OWG). In 2010, OWG became part of
Pernod Ricard's new wine company, Premium Wine Brands. In 2013, Premium Wine
Brands changed its trading name to Pernod Ricard Australia.
In addition to owning a large range of local wines, Pernod Ricard Australia owns
three main Australian brands and wineries: Jacob's Creek, I am George and St
Hugo. In 2014 and 2015 respectively, the company closed its Wyndham Estate and
Richmond Grove brands and wineries. Over the past five years, the company has
maintained the price position of Jacob's Creek in an environment of price-cutting,
which has allowed it to retain brand equity and value growth. Pernod Ricard SA has
aimed to expand to new markets in China, Japan, Scandinavia and North America to
boost sales.
Pernod Ricard Australia has underperformed the industry over the past five years.
The company's industry-related revenue is expected to fall at an annualised 2.8%
over the five years through 2021-22, to $483.3 million. Pernod Ricard's wine
business is primarily bolstered by its Jacob's Creek Brand, which is the top wine
brand in Australia both by volume and revenue. Declining sales of Jacob's Creek
were the major driver of the company's falling revenue in 2019-20 and 2020-21.
Demand from China is expected to decline due to the country's government
implementing a 160.6% anti-dumping duty on the company's wines. However, an
uptick in sales of this brand in Australia and Canada is expected to mitigate some
of this decline. Pernod Ricard's profit margins have fluctuated over the past five
years, but have declined overall due to rising restructuring and winery
underutilisation expenses.
Pernod Ricard Pacific Holding Pty Ltd - industry segment performance*

Year Revenue Growth
($m) (% change)
2011-12 465.0 N/C
2012-13 450.5 -3.1
2013-14 486.2 7.9
2014-15 499.6 2.8
44 IBISWorld.com
Pernod Ricard Pacific Holding Pty Ltd - industry segment performance*

Year Revenue Growth
($m) (% change)
2015-16 529.2 5.9
2016-17 557.3 5.3
2017-18 550.4 -1.2
2018-19 528.2 -4.0
2019-20 513.5 -2.8
2020-21 490.4 -4.5
2021-22 483.3 -1.4
Source: IBISWorld
Note: *Estimate
AMPHORA AUSTRALIA PTY LTD
Market Share: 6.1%

Amphora Australia Pty Ltd, trading as
Accolade Wines, is an SA-based manufacturer
and distributer of wine. The business was
founded in 1853 as Thomas Hardy & Sons
Limited. In 2003, the company was acquired by Constellation Brands, Inc. (CBI). In
2008, the company was renamed Constellation Australia Limited, and incorporated
Constellation Wines Australia and Europe (CWAE), which held the Australian, UK
and South African wine assets formerly owned by US-based wine producer CBI. In
early 2011, CBI agreed to sell 80.0% of CWAE to Sydney-based CHAMP Private
Equity for $230.0 million. CBI retained a 20.0% interest in the company. In June
2011, the company changed its name to Accolade Wines. In 2018, CHAMP agreed
to sell Accolade Wines to the Carlyle Group for approximately $1.0 billion. The sale
included CHAMP's 80.0% interest in the company and CBI's remaining 20.0%
interest. The Carlyle Group is expected to focus on exports to Asia. Accolade Wines
owns several wineries in Australia, including Hardys, Omni, Banrock Station and
Brookland Valley.
Accolade Wines has expanded its operations through a series of acquisitions over
the past five years. In 2014, Accolade Wines acquired a range of New Zealand wine
brands from the Mud House Wine Group. In 2015, Accolade Wines acquired Grant
Burge Wines, a Barossa Valley winemaker, for approximately $50 million. In 2017,
the company acquired Fine Wine Partners from Lion Pty Ltd for approximately $100
million. These acquisitions have supported the company's revenue growth over the
past five years. In August 2019, the company sold its Knappstein Winery in Clare,
South Australia to China-based Australian Yinmore Wines. In September 2019,
Accolade also sold its Stanley and Houghton Wineries in New South Wales and
Western Australia respectively. The company completed the purchase of Accolade
Wines New Zealand in the same month. As many venues around the country began
to re-open after initial COVID-19 restrictions ended in May 2020, Accolade Wines
launched its Your Venue, Our Shout support package. This offered customers
complimentary replacement stock for the first month of re-opening.
Accolade Wines has underperformed the overall industry over the past five years.
The company's industry-related revenue is expected to fall at an annualised 1.9%
45 IBISWorld.com
over the five years through 2020-21, to $423.6 million. The company undertook
heavy restructuring in 2011-12, where Accolade Wines formed strategic
partnerships with other wine producers. These changes and several new
acquisitions supported strong revenue growth until 2017-18. However, revenue has
since declined. This decline is due to the effects of the COVID-19 outbreak, sales of
several of its wineries and falling demand from China due to the country
implementing a 160.6% anti-dumping duty on Accolade's products. The company's
profitability has declined due to rising purchase costs over the past five years.
Amphora Australia Pty Ltd - industry segment performance*

Year** Revenue Growth
($m) (% change)
2011-12 417.4 N/C
2012-13 405.8 -2.8
2013-14 386.7 -4.7
2014-15 404.4 4.6
2015-16 434.6 7.5
2016-17 465.1 7.0
2017-18 492.7 5.9
2018-19 469.5 -4.7
2019-20 436.0 -7.1
2020-21 424.8 -2.6
2021-22 423.6 -0.3
Source: Annual Report and IBISWorld
Note: *Estimate **Year end June
Other Players In addition to the major players, the industry includes numerous medium-size
companies. These include Australian Vintage Limited and De Bortoli Wines. Smaller
producers include Zilzie Wines, Kingston Estate Wines and Tyrrell's Wines. With the
growing popularity of cider in the Australian market, cider producers have expanded
their market share over the past five years.
Many of the firms in the Wine Production industry are small family-owned
businesses. However, the ownership of wineries has been moving away from
family-owned firms towards public companies. Going public gives companies
access to additional capital, allowing for greater investment, acquisitions and the
consolidation of infrastructure, which can boost cost efficiencies.
AUSTRALIAN VINTAGE LIMITED
Market Share: 4.0%

Australian Vintage Limited (AVL) is an Australian-owned and ASX-listed integrated
winemaking business. It is one of the largest vineyard owners in Australia.
Headquartered in Cowandilla, SA, the company has a brand portfolio that includes
McGuigan Wines, Tempus Two, Nepenthe, Barossa Valley Wine Company and
Passion Pop. Its Buronga Hill winery in New South Wales is one of the largest
wineries in Australia and produces most of the company's wines. Its Hunter Valley
and Barossa Valley wineries produce premium and boutique vintages in smaller
volumes. Revenue in 2019-20 was down largely as a result of COVID-19 restrictions
on cellar door sales. In November 2020, the Chinese Government placed a 160.6%
46 IBISWorld.com
anti-dumping duty on the company's wine. However, according to the company, only
2% of sales had been expected to come from China in the current year.
Consequently, falling demand from China has not had a material impact on
earnings.
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Operating Conditions
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Capital Intensity The level of capital intensity is Medium
The Wine Production industry exhibits a

moderate level of capital intensity that has
increased over the past five years. For every
dollar paid as wages in 2021-22, an estimated
$0.22 is spent on capital investment. The
extent of vertical integration, particularly
upstream integration, affects capital intensity.
Ownership of vineyards and winemaking
facilities can increase capital intensity due to
some winemakers' reliance on bulk wine
production. Bulk wine producers tend to have
a higher level of capital intensity, due to the
need for investment in winemaking machinery
and lower staff requirements in packing and
selling. Wine producers also employ staff to
undertake vineyard maintenance and operate
machinery. Highly skilled staff are required for
product branding and marketing due to the
intense competition in the industry.
Technology And Potential Disruptive Innovation: Factors Driving Threat of Change

Systems Level Factor Disruption Description
Annualized growth in the number of

enterprises in the industry, ranked against
Very High Rate of Entry Very Likely all other industries. A greater intensity of
companies entering an industry increases
the pool of potential disruptors.
A measure for the mix of patent classes

Innovation assigned to the industry. A greater
High Likely concentration of patents in one area
Concentration increases the likelihood of technological
disruption of incumbent operators.
A ranked measure for the number of

Rate of patents assigned to an industry. A faster
Moderate Potential rate of new patent additions to the
Innovation industry increases the likelihood of a
disruptive innovation occurring.
A qualitative measure of barriers to entry.

Fewer barriers to entry increases the
Moderate Ease of Entry Potential likelihood that new entrants can disrupt
incumbents by putting new technologies
to use.
Market A ranked measure of the largest core

Low Unlikely market for the industry. Concentrated core
Concentration markets present a low-end market or new
49 IBISWorld.com
Level Factor Disruption Description
market entry point for disruptive

technologies to capture market share.
The industry is adding new patent technologies at a rate in line with the average
across all industries, which suggests a stable addition of technology. However, the
concentration of technologies is high. This creates the potential for innovation
outside the focus of industry leaders to gain traction.
The industry structure creates a moderate level of entry barriers, which is coinciding
with a high rate of new competitors entering the industry. This high rate of entry
creates a significant pool of potentially disruptive entities and the industry structure
does not significantly affect their growth potential.
Major market segments for industry operators are relatively diversified. The spread
of market segments suggests that there are limited entry points other than those
already served my incumbent operators.
Technology disruption in the Wine Production industry has occurred

through process innovation and automation, focusing on cost
reductions, product consistency and environmental sustainability.
New machines have been developed for harvesting crops and crushing grapes,
while some operators have adopted computerised equipment for winery operations
such as controlling tank temperature, filtration and fining processes. Bottling and
packaging processes have also been automated. Additionally, smartphone apps
and sensor technology can monitor grape growing and vine conditions.
Several initiatives are currently underway to improve the industry's environmental

and economic sustainability. These initiatives focus on improving energy and
supply-chain efficiency, reducing grapevine disease, and addressing the use of
chemicals in vineyards and wineries. These projects are focusing on minimising
environmental damage through improved wastewater management, recycling
programs, and using scanning technology to reduce the chemicals used when
spraying vines. Organic, biodynamic, natural and minimal intervention wines, which
appeal to more environmentally consciousness drinkers, have also grown in
popularity.
The level of technology change is Medium
Technological change in the industry is at a moderate level.

The industry's major technological developments are typically product innovations,
such as improvements to packaging, or process innovations, which improve supply
chain efficiency and productivity. Industry operators use technology to improve the
reliability of the production process, providing consumers with a more consistent
product. Wine producers actively work on innovating wine packaging and design, as
aesthetics and product differentiation are important in attracting consumers.
Having appealing packaging or labelling allows a producer to distinguish
themselves from competitors, helping to generate sales. Producers have been
50 IBISWorld.com
increasingly embracing recyclable packaging and experimenting with single-serve

packaging such as pouches, cans and aseptic cartons.
Revenue Volatility The level of volatility is Medium
Note: Revenue growth and decline reflective of 5-year annualized trend. Y-axis is in
logarithmic scale. Y-axis crosses at long-run GDP. X-axis crosses at high volatility
threshold.
The Wine Production industry has displayed moderate revenue

volatility over the past five years.
Changing demand in export markets and fluctuating wine production contribute to
revenue volatility. Free trade agreements have further added to the volatility. A
series of free trade agreements with China, Japan and South Korea have
contributed to strong demand growth from Asian markets, especially China, over
much of the past five years. Additionally, exchange rate fluctuations and changes in
consumer tastes affect export wine prices and general consumption of wine in
overseas markets, which in turn contributes to volatility. While exports to China are
expected to fall substantially over the two years through 2021-22, increased
domestic demand as well as increased sales to the United Kingdom and Hong Kong
have helped mitigate declines.
Strong competition for retail sales is forcing Australian winemakers to reduce

prices, which is adding to revenue uncertainty and hampering domestic demand
growth. Production and prices are affected by the supply of grapes, which is
affected by weather, soil conditions and outbreaks of disease. Earnings fluctuate
due to changing input prices, variations in grape supplies and restructuring costs.
51 IBISWorld.com
Regulation & The level of regulation is Medium and is Steady

Policy
The Wine Production industry faces moderate regulation.
Regulation in the industry has remained largely stable over the past five years. Key
areas of industry regulation concern taxation, licensing requirements and
adherence to labelling standards.
Exports
Wine producers wanting to export their products have to obtain an

export licence from the Australian Grape and Wine Authority
(AGWA).
The AGWA is responsible for regulating exports of Australian wine and defines
geographical boundaries to be used in labelling to further establish the reputation
of wine regions in Australia. Furthermore, it undertakes negotiation on behalf of
Australian growers to reduce barriers to trade with other countries. The regulation
of wine exports is primarily to ensure the quality of Australian products marketed
overseas. Furthermore, AGWA ensures that Australian wine exports comply with the
numerous trade agreements to which Australia is a signatory. From April 2018,
AGWA is allowed to stop shipments of wine to importing countries if they fail to
meet exporting requirements. This legislation aims to protect the reputation of
Australian wine and prevent illegal copies.
Labelling
AGWA runs a label integrity program to verify that labelling claims

are accurate in terms of what varieties of grapes are used and what
regional zones are referred to.
It maintains geographical indicators that are used by producers in their labelling.
For a wine to be labelled as being from a particular geographical area, at least 85%
of the fruit that goes into making the wine must be from that area. This protects the
reputation of wine producing regions from harmful claims that a low-quality product
may be produced in that area. This system was introduced in response to the
agreement to cease using European place names in product labels in return for
greater market access in Europe. As a result, winemakers are required to maintain
records attesting to the integrity of the vintage. Italy and Australia are still debating
the use of the name prosecco on wine labels, as Italian wine producers want the
name to be restricted to a geographical region in Italy. Australian prosecco is one of
the fastest growing wine styles domestically and Winemakers' Federation of
Australia is pushing for the continued use of the name in Australia.
A senate inquiry published in February 2016 also looked into the labelling of
unbranded wines produced for retailers on contract and sold alongside branded
wines produced by industry operators. Industry firms have complained that the lack
of clear indicators of the source and ownership of the retailer-owned wine makes it
indistinguishable from branded winery produce. Firms have argued that this creates
52 IBISWorld.com
unfair competition for wineries and potentially misleads consumers. The inquiry
recommended that the Federal Government legislate labelling requirements that
force retailers to declare on the label if the wine is produced by a major retailer.
Australia has two wine-specific trade agreements. The Trade in Wine agreement
between the European community and Australia has improved Australia's access to
the European markets while the Agreement on Mutual Acceptance of Oenological
Practices between Australia, New Zealand, Argentina, Chile, Canada, the United
States and South Africa enables Australian wine producers to market industry
products in the participating countries, as long as it meets Australian winemaking
standards. In December 2015, Australia and China signed a free trade agreement
(ChAFTA). In January 2019, Chinese import tariffs on Australian wine products were
officially eliminated after being gradually reduced since the inception of ChAFTA.
However, in November 2020, the Chinese Government announced it was placing
anti-dumping duties on Australian wine. These range from 107.1% to 212.1%. In
February 2019, the Australian and United Kingdom Governments signed the
Australia-United Kingdom Wine Agreement to keep the current trade provisions in
place between the two countries when the United Kingdom leaves the European
Union.
Excise taxes
The industry faces excise taxation imposed by the Federal

Government.
Unlike beer or spirits, excise taxes on wine are charged on the wholesale price of
the product, so cheaper wines generally pay less in taxes per litre of alcohol. This
structure is seen to be favourable to bulk and cask wine producers. In 2015 and
2016 there were discussions regarding adjusting the wine equalisation tax (WET)
scheme currently in place. This idea was raised as part of the senate inquiry into
the Wine Production and Grape Growing industries.
Modern Slavery Act
In November 2018, the Federal Government passed the Modern

Slavery Act 2018.
The act came into effect starting 1 January 2019 and outlines new reporting
requirements for larger Australian businesses. Companies with annual
consolidated revenue of at least $100.0 million will need to report on how they act
to mitigate the risks of modern slavery in their operations and supply chains. The
first reports will apply to 2018-19 and be released in 2020. The NSW Government
also considered its own state-based version of the report, which would apply to
businesses generating consolidated annual revenue of at least $50.0 million. The
NSW Modern Slavery Act 2018 was due to apply beginning 1 July 2019, but was
delayed for further consultation. The Modern Slavery Act is expected to affect the
larger players in the industry, and several of the major players have already released
Modern Slavery Act statements for their UK operations.
53 IBISWorld.com
Industry The level of industry assistance is Medium and is Steady

Assistance
The Wine Production industry receives moderate industry
assistance.
Several industry associations and government bodies provide various supportive
activities for the industry. Australian Grape and Wine Incorporated and Australian
Grape and Wine Authority are two industry assistance groups.
Australian Grape and Wine Authority (AGWA)
Established by the Australian Grape and Wine Authority Act 2013,

AGWA is a Federal Government body that assists industry growth
and international competitiveness.
AGWA imposes a levy on grape growers and uses these contributions to fund
research activity. AGWA has been reported to have seriously curtailed its research
and development spending over the past five years as member contributions have
declined. In 2016, the Federal Government committed to providing $50.0 million of
funding to AGWA over the four years to 2020-21. This funding is expected to be
used to assist local wine producers to access export markets.
Wine equalisation tax
The Federal Government established a wine equalisation tax (WET)

rebate in 2000 that aimed to support small wineries in Australia.
The scheme offered a rebate of up to $500,000 on excise taxes paid on wine. As
part of the 2016-17 Federal Budget, the Federal Government set out a timetable for
reducing the size of the maximum WET rebate. The cap on rebate claims was
lowered to $350,000 from July 2018. The changes to the scheme are designed to
prevent producers from taking advantage of the WET rebate and help to address
the oversupply of bulk wine, requiring producers to own or have a long-term lease
over a winery and sell packaged, branded wine domestically.
Trade protection and free trade agreements
Tariffs on wines have fallen since 1988, which has removed some of
the industry's protections against imports.
All tariffs on wine are now set at 5.0% (except for a concession rate of 4.0% for
developing countries). Some varieties also have a flat charge per litre, which varies
according to the type of wine and its alcoholic content.
Australia has two wine-specific trade agreements. The Trade in Wine agreement
between the European community and Australia has improved Australia's access to
the European markets while the Agreement on Mutual Acceptance of Oenological
Practices between Australia, New Zealand, Argentina, Chile, Canada, the United
States and South Africa enables Australian wine producers to market industry
products in the participating countries, as long as it meets Australian winemaking
54 IBISWorld.com
standards. In December 2015, Australia and China signed a free trade agreement
(ChAFTA). In January 2019, Chinese import tariffs on Australian wine products were
officially eliminated after being gradually reduced since the inception of ChAFTA.
As a result of the FTA, Australian wine exports to China have surged. However, in
November 2020, the Chinese government placed anti-dumping duties on Australian
wine. Though, the Australian Government disputes the claim that Australian wine
producers are dumping their products in China, that is, pricing it a below either the
cost of production or the price it charges in other markets. Consequently, the
Australian Government filed an official complaint to the World Trade Organisation in
June 2021 and is seeking mediation with the Chinese Government to resolve the
dispute.
In February 2019, the Australian and United Kingdom Governments signed the
Australia-United Kingdom Wine Agreement to keep the current trade provisions in
place between the two countries when the United Kingdom leaves the European
Union. Furthermore, in June 2021, the Australian and United Kingdom governments
announced that they had reached an in-principle agreement on a broad Free Trade
Agreement (FTA) between the two countries. Once the FTA enters into force all
tariffs on Australian wine will be eliminated.
Industry associations
Australian Grape & Wine Incorporated is the peak body of the Wine
Production industry.
It represents the interests of wine producers, advocates for producers and
promotes the industry to government and financial communities. It was officially
formed in February 2019 through the merger of the lead representative bodies for
wine producers, the Winemakers' Federation of Australia, and wine grape growers,
Australian Vignerons.
Further assistance is available to producers through various state or region-based

industry associations. Additionally, the Australian Trade and Investment
Commission provides assistance to businesses looking to export through its Export
Market Development Grants. These grants provide reimbursement to small and
medium businesses that are undertaking export promotion activities.
55 IBISWorld.com
Key Statistics
Industry Data
Demand
2013–14 5,810 1,598 2,193 1,918 16,449 2,106 855 1,092 4,559
2014–15 6,108 1,661 2,141 1,897 16,116 2,277 853 1,104 4,684
2015–16 6,906 1,899 2,147 1,905 17,066 2,522 929 1,141 5,313
2016–17 7,158 2,069 2,119 1,889 16,767 2,635 876 1,170 5,399
2017–18 7,829 2,192 2,116 1,890 15,896 3,098 936 1,300 5,667
2018–19 7,710 2,205 2,232 2,011 16,547 3,131 910 1,318 5,488
2019–20 7,627 1,983 2,305 2,082 14,969 3,024 904 1,206 5,508
2020–21 7,190 1,790 2,230 2,009 14,887 2,632 943 1,170 5,500
2021–22 6,945 1,806 2,188 1,954 14,754 2,255 928 1,147 5,618
2022–23 7,224 1,951 2,247 2,014 15,692 2,376 949 1,200 5,797
2023–24 7,373 1,946 2,283 2,031 15,856 2,463 957 1,202 5,867
2024–25 7,587 2,026 2,318 2,065 16,188 2,561 964 1,237 5,989
2025–26 7,708 2,089 2,325 2,051 16,166 2,629 974 1,255 6,053
2026–27 7,867 2,171 2,335 2,059 16,326 2,694 982 1,285 6,155
Annual Change
Demand
(%) (%) (%) (%) (%) (%) (%) (%) (%)
2013–14 -4.55 23.2 3 2 3 -2.34 11.8 0.80 -2.89
2014–15 5.13 3.98 -2 -1 -2 8.08 -0.29 1.16 2.75
2015–16 13.1 14.3 0 0 6 10.8 8.92 3.34 13.4
2016–17 3.63 8.90 -1 -1 -2 4.46 -5.68 2.48 1.62
2017–18 9.37 5.97 -0 0 -5 17.6 6.82 11.1 4.95
2018–19 -1.53 0.58 5 6 4 1.07 -2.79 1.43 -3.15
2019–20 -1.07 -10.1 3 4 -10 -3.45 -0.61 -8.56 0.36
2020–21 -5.74 -9.74 -3 -4 -1 -13.0 4.24 -2.95 -0.15
2021–22 -3.40 0.87 -2 -3 -1 -14.3 -1.54 -1.97 2.15
2022–23 4.02 8.01 3 3 6 5.36 2.26 4.62 3.19
2023–24 2.04 -0.23 2 1 1 3.65 0.83 0.14 1.19
2024–25 2.90 4.07 2 2 2 3.98 0.67 2.95 2.09
2025–26 1.60 3.12 0 -1 -0 2.63 1.03 1.45 1.07
2026–27 2.06 3.94 0 0 1 2.48 0.89 2.39 1.69
Key Ratios
Year IVA/Revenue Imports/Demand Exports/Revenue Revenue per Wages/Revenue Employees per Average Wage
Employee estab.
(%) (%) (%) ($'000) (%)
2013–14 27.5 18.8 36.3 353 18.8 7.50 66,357
2014–15 27.2 18.2 37.3 379 18.1 7.53 68,516
2015–16 27.5 17.5 36.5 405 16.5 7.95 66,864
2016–17 28.9 16.2 36.8 427 16.3 7.91 69,750
2017–18 28.0 16.5 39.6 493 16.6 7.51 81,756
2018–19 28.6 16.6 40.6 466 17.1 7.41 79,670
2019–20 26.0 16.4 39.6 510 15.8 6.49 80,533
2020–21 24.9 17.1 36.6 483 16.3 6.68 78,592
2021–22 26.0 16.5 32.5 471 16.5 6.74 77,742
2022–23 27.0 16.4 32.9 460 16.6 6.98 76,478
2023–24 26.4 16.3 33.4 465 16.3 6.95 75,795
2024–25 26.7 16.1 33.8 469 16.3 6.98 76,433
2025–26 27.1 16.1 34.1 477 16.3 6.95 77,651
2026–27 27.6 16.0 34.2 482 16.3 6.99 78,733
56 IBISWorld.com
Additional Resources
Additional Wine Australia
Resources http://www.wineaustralia.com
Australian Grape & Wine

http://www.agw.org.au
Australian Bureau of Statistics

http://www.abs.gov.au
Industry Jargon BULK WINE

Bulk wine is wine sold in containers with a volume greater than 25 litres. This wine typically
tends to be cheaper and of lower quality.
CELLAR-DOOR SALES
Direct-to-public sales made by wineries.
NEW WORLD
Wine producers outside the traditional wine regions of Europe and the Middle East (e.g.
from Australia, New Zealand, Chile, Argentina and South Africa).
PERRY
An alcoholic beverage made by fermenting pears.
PREMIUMISATION
The shift in consumer preference towards more expensive premium wines.
WINERIES
Independent, vertically integrated wine producers that grow grapes and produce wine in a
small, localised area.
Glossary Terms BARRIERS TO ENTRY

High barriers to entry mean that new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an industry.
57 IBISWorld.com
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and equipment) with
that spent on labour. IBISWorld uses the ratio of depreciation to wages as a proxy for capital
intensity. High capital intensity is more than $0.333 of capital to $1 of labour; medium is
$0.125 to $0.333 of capital to $1 of labour; low is less than $0.125 of capital for every $1 of
labour.
CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted for inflation
using the current year (i.e. year published) as the base year. This removes the impact of
changes in the purchasing power of the dollar, leaving only the 'real' growth or decline in
industry metrics. The inflation adjustments in IBISWorld’s reports are made using the
Australian Bureau of Statistics' implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within Australia, regardless of their country of
origin. It is derived by adding imports to industry revenue, and then subtracting exports.
EMPLOYMENT
The number of permanent, part-time, temporary and casual employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE
A division that is separately managed and keeps management accounts. Each enterprise
consists of one or more establishments that are under common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment is a single
physical location where business is conducted or where services or industrial operations are
performed. Multiple establishments under common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by Australian companies to customers
abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries to be sold in
Australia.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry. Concentration is
considered high if the top players account for more than 70% of industry revenue. Medium
is 40% to 70% of industry revenue. Low is less than 40%.
58 IBISWorld.com
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside the firm (such as commission
income, repair and service income, and rent, leasing and hiring income); and capital work
done by rental or lease. Receipts from interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)

The market value of goods and services produced by the industry minus the cost of goods
and services used in production. IVA is also described as the industry's contribution to GDP,
or profit plus wages and depreciation.
INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue and imports to
domestic demand. For exports/revenue: low is less than 5%; medium is 5% to 20%; and high
is more than 20%. Imports/domestic demand: low is less than 5%; medium is 5% to 35%;
and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld determines an
industry's life cycle by considering its growth rate (measured by IVA) compared with GDP;
the growth rate of the number of establishments; the amount of change the industry's
products are undergoing; the rate of technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as nonemployers. These are
mostly set up by self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a company’s
profitability. It is calculated as revenue minus expenses, excluding interest and tax.
VOLATILITY
The level of volatility is determined by averaging the absolute change in revenue in each of
the past five years. Volatility levels: very high is more than ±20%; high volatility is ±10% to
±20%; moderate volatility is ±3% to ±10%; and low volatility is less than ±3%.
WAGES
The gross total wages and salaries of all employees in the industry.
59 IBISWorld.com
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C1214 Wine Production in Australia Industry Report

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C1214 Wine Production in Australia Industry Report

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AU INDUSTRY (ANZSIC) REPORT C1214

Wine Production in Australia

IBISWorld.com +61-3-9655-3800 info@IBISWorld.com

About This Industry...........................................5 Competitive Landscape...................................32

Industry Definition..........................................................5 Market Share Concentration....................................... 32

Industry at a Glance.......................................... 7 Major Companies............................................ 41

Executive Summary....................................................... 9 Major Players............................................................... 41

Products and Markets..................................... 21 Industry Data................................................................56

• Profit margins have been impacted by reduced sales to licensed establishments

About This Industry

Major Players Treasury Wine Estates Limited

Casella Wines Pty Limited

Pernod Ricard Pacific Holding Pty Ltd

Amphora Australia Pty Ltd

Main Activities The primary activities of this industry:

White wine production

Sparkling wine production

Fortified wine production

The major products and services in this industry:

Other wines and alcoholic beverages

RELATED INTERNATIONAL INDUSTRIES

Wine Production in the UK Cider Production in the UK Wine Production in New

2017-2022 2022-2027 2017-2027 -2.4% -0.3%

$409.8m POSITIVE IMPACT

Annual Growth Annual Growth Concentration

-8.2% MIXED IMPACT

Life Cycle Revenue Volatility

14,754 The trend towards premiumisation in wine consumption has

$1.1bn Undersupply of wine is projected to become an issue for the

Products & Services Segmentation

59.5% 32.2% 4.0% 4.3%

Red wine White wine Cider Other wines and alcoholic

Major Players % = share of industry revenue SWOT

Key External Per capita alcohol consumption

Total alcohol consumption

Demand from liquor retailing

Demand from pubs, bars and nightclubs

Domestic price of wine grapes

A shift in consumer preference towards premium, higher-priced industry products

Increases in the per-litre value of wine consumed in Australia and

Rising overseas demand for Australian wine has allowed local

The increasing dominance of Woolworths and Coles in downstream

Historical Performance Data

The Chinese Government decided to place anti-dumping duties of

Prior to the imposition of the anti-dumping duties, the industry was

Industry profitability is forecast to grow moderately over the next

Performance Outlook Data

LIFE CYCLE REASONS

The industry faces strong competition from international producers

Growing demand is expected from developing Asian countries such as Indonesia,

Products and Markets

Liquor Retailing in Australia Paperboard Container Manufacturing in

Red wine represents the largest share of industry revenue.

Chardonnay is the second most common wine produced in Australia. However,

Cider, which includes perry, accounts for an estimated 4.0% of

Other wines and alcoholic beverages

Other alcoholic beverages in the industry include sparkling wine,

Demand The Wine Production industry relies heavily on export activity.

Discretionary income and consumer sentiment

Typically, higher discretionary income allows consumers to spend

Prices and exchange rates

Wine consumption in Australia has been boosted by the favourable

Wine, cider and other alcoholic beverages produced by the industry