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Standing Committee on Agriculture, Resources, Fisheries and Forestry - 05/06/2013 - Wine Australia annual report 2011-12

CLARK, Mr Andreas, Chief Operating Officer, Wine Australia Corporation

Subcommittee met at 17 : 21

CHAIR ( Hon. DGH Adams ): I declare open this public hearing of the House of Representatives Standing Committee on Agriculture, Resources, Fisheries and Forestry for its inquiry into the Wine Australia annual report 2011-12. I welcome Mr Clark. Although the committee does not require you to give evidence under oath, I should advise you that this hearing is a formal proceeding of the parliament and warrants the same respect as proceedings of the House. Giving false or misleading evidence is a serious matter and may be regarded as a contempt of parliament. I invite you to make a few introductory remarks. Then we will probably have a few questions for you.

Mr Clark : Thanks for the invitation to appear here today. We are always very keen to learn of parliamentary interest in our operations, given the importance of the wine sector to the Australian economy, and to regional economies in particular. It is fair to say that it has been a challenging period of time over the last few years for the Australian wine industry. A confluence of matters have caused that. They would be well known to you. They include the high Australian dollar, which is a factor for a whole range of exporting communities; the economic situation in our key global markets, notably the United Kingdom and the United States; and increasing competition from other supplying countries. We are here to talk about history, the 2011-12 annual report.

CHAIR: That is the context. The committee can look at many reports. We have chosen several. Your report is one of them. You do not have just specifically talk to that report. We are also interested in the broader aspects of the industry.

Mr Clark : As we stand here today, we believe that there are reasons for cautious optimism, which is a welcome development. There is a whole range of factors that are still pulling on the industry but at the same time we can see some reasons for the Australian wine sector—and in particular from an exporting perspective—to except some future uplift in some of our key markets over the coming years.

Wine Australia's key role is to provide strategic support for the wine sector. We operate across four main areas. One is called market development. That is promoting the Australian wine industry generally in our key export markets and building reputation and convincing consumers in key export markets that they should try Australian wine rather than wine from other competitor countries. That is where our heavy emphasis is. But in addition to that we are also focused on maintaining our reputation. There are key planks of our regulatory framework that support that.

Some time ago, we had an export approval process with a tasting panel. We have moved away from that recently. But that does not diminish the controls that we have in place generally for the sector. We have a very robust label integrity program, which is enshrined in our legislation, the Wine Australia Corporation Act, which mandates recordkeeping requirements through the supply chain and in particular with respect of vintage, variety and regional claims. Ultimately, any purchaser of an Australian wine in any market, when they look at it and see that it is, for example, a 2010 Shiraz from the Canberra region, they can have confidence that what is in the bottle is what is described on the label. We maintain our reputation.

In addition to that, we also have a focus on what is called wine sector intelligence, which involves gathering data, pooling it and providing it to industry to help businesses make informed commercial decisions at an enterprise level. Finally, we have a key focus on trade and market access issues. This involves helping address both tariff and non-tariff barriers to Australian wine exports in some of our key markets. That is a snapshot of what we do. Our key mission is to identify and to maximise the sustainable demand for Australian wine. I am happy to answer any queries.

Mr LYONS: You have moved away from tasting. How do you test wine if you do not taste it?

Mr Clark : The tasting process that we had in place previously was about ensuring that there were no faults.

Mr LYONS: Okay.

Mr Clark : It was not about the quality dimension per se; it was ensuring that wine that left Australia was fault free. That served its purpose over a period of time. But in the last year in which it was operational we rejected 0.2 of one per cent, 38 wines out of over 15,000. We conducted a review and worked very closely with the peak industry body, the Winemakers Federation of Australia, and decided that if there was a slightly oxidised wine turning up in Tescos in London that would not permanently damage our reputation in that market. We thought that the way we can use our resources better in that area is to focus on audits and helping companies get systems in place to ensure that they are meeting the requirements of the label integrity program that I outlined. We also undertake an analysis program. We collect samples and submit them for analysis to check for compliance with agrichemical limits, for example. We are using that to build up a database that is more in tune with some of the potential market access issues in some of our markets.

Mr LYONS: So the consumer makes the decision.

Mr Clark : Absolutely.

CHAIR: Are Australia's 60 wine regions identifiable?

Mr Clark : Officially, there are over 100 registered geographical indications. But—

CHAIR: Run through the registration process. How are they registered? Are they registered with the government or are they registered—

Mr Clark : There is a process set up under our act. Wine Australia is a statutory corporation.

CHAIR: That is why you are here.

Mr Clark : That is why I am here. Part of our act establishes a geographical indications committee, which is a statutory committee. It is not a committee of our board per se. It is a committee of three, with representatives nominated by the peak industry bodies, being the Winemakers Federation of Australia and Wine Grape Growers Australia. That body is charged with running the process to officially determine Australia's wine regions, both the name and the official boundaries. That work has largely been completed. There are not many new regions coming on board.

CHAIR: In the world, either.

Mr Clark : No. Not as much as—

CHAIR: We get into things like Coonawarra and where it ends and where it begins.

Mr Clark : That was probably one of the most well-known, and it was a very fiercely fought dispute.

CHAIR: For the best red wine in the world.

Mr Clark : Yes.

CHAIR: I went down another stream there that I was not intending to. There has been a falloff in the amount of wine we are drinking and exporting. In world terms has that got something to do with the dollar, with competition from other parts of the world and with new people coming into the fray. And with the world financial crisis, I guess, people might not drink quite as much wine. Also, there are fewer retail outlets now in Australia than there were 10 or 15 years ago for smaller wine makers to get into. What effect is that having on smaller regions and smaller areas being able to get into the retail market?

Mr Clark : In regard to your first question, I think you have probably identified all the factors in your question. I think it is probably a combination of the above: the economic situation in our key markets and the Australian dollar, which has made it very hard to compete. For example, back in 2004 Australian wine was sold at US$20 in the United States. A case of that wine would have been shipped on an FOB value of $98. To hit that price point in the current climate you have to ship it at $65. So on a per bottle basis it has gone from $8.17 down to $5.42. That gap, which is nearly $3, has to be absorbed by the producer in the absence of a price increase, which is very difficult to get. With other currencies not appreciating as strongly—the US dollar for example—in the US market Chilean and South African wine, and even European wine, are now taking some of the market share away from us.

Australia had such a good run. The export boom was quite phenomenal really. Naturally trends change. Anyone who was drinking Australian might start to move on to something else, because fashions change, so they might move on to another country of origin. That is what a lot of our marketing efforts have been focused on, trying to reignite that chatter and the excitement around the Australian category and get some of the key influences in those markets, because they are the gatekeepers to get to consumers. Often consumers find it hard to decipher the world of wine. If you get some of the key influences—people who write in newspapers and magazines—to start talking up the Australian category and say, 'Yeah, you should come back to it,' that will hopefully take us in the right direction.

CHAIR: And the retail outlets?

Mr Clark : Retail consolidation is certainly flagged as a very challenging issue for Australian wine producers. This is an area where, as a sort of policy issue, it is driven by the peak industry body, the Winemakers' Federation of Australia. So from a Wine Australia Corporation perspective, as I sit here today I note it is a concern. It is certainly always flagged by the wine community but, ultimately, for a discrete policy statement that falls to the Winemakers' Federation, because they have carriage of those types of policies on advocacy issues. We are not an advocacy body, you would appreciate. I know they are heavily involved in that issue. In the past they have made submissions to the ACCC, for example, when one of the retailers was looking to acquire Cellarmasters, which was ultimately successful. Also, there was the issue around their acquiring production assets as well. I cannot at this point say much more than that, but it is certainly an issue of concern and we follow it closely, but they have lead carriage on that.

Mr MITCHELL: I have a general question. I have a lot of wine growers in the seat of McEwen. I have the Yarra Valley, right up to Heathcote and Macedon. I do not know if you can answer this, but the real concern is about non-genuine wine growers. It is a matter of being forced to compete with people who buy product, buy bottles and pay someone to bottle it and claim it as a wine. Is that something you guys have been dealing with? Do you get those sort of complains? A lot of what I would term the genuine growers—blokes who get out there and prune their own vines—are having this problem.

Mr Clark : It is a fundamental issue to the industry. Again, in a similar refrain, the Wine Makers Federation is the lead policy agent on that issue. Being a tax matter, as a statutory body it is difficult for us to enter that debate. We watch it very closely. Suffice to say that we are aware that the Winemakers' Federation are heavily focused on that issue at the moment and are working through some possible options.

Mr MITCHELL: Is there growing concern with people?

Mr Clark : I think so. It is a shared and growing concern across the wine sector, it is fair to say. It is a difficult issue at an industry level to try to work through all the competing interests. There is a view that it has distorted the supply base. I know that the Winemakers' Federation are looking through the evidence around that issue so they can formulate some policy decisions around it, which they can then have discussions with the government about. So it is a key issue. It is difficult for me to say much more in my capacity of being involved with Wine Australia.

Mr MITCHELL: I appreciate that answer.

Mr LYONS: I have some very good wineries in my electorate. We have actually given some money towards building restaurants and things for the marketing. How does the recent MOU with Tourism Australia improve Wine Corporation's ability to promote Australia's lesser known wineries to inbound international tourists, and will this shift the focus away from increasing domestic wine related tourism? Second, what are the major innovations in the domestic tourism market with wine? Also, how successful was Aussie Wine Month in April 2013?

Mr Clark : I will try to talk to those issues in one response, but if there are any gaps let me know and I can follow it up. I am glad you have noted the cooperation we have in place with Tourism Australia, because we think this is a significant development. At one level it is starting with an element of colocation. We commenced that in Sydney over 18 months ago. We are building on that shortly in Shanghai. We are going to be collocating from mid-July with Tourism Australia in Shanghai. Also, we are pleased to report that it is not just a one-way street. Tourism Australia are looking at putting a person in our office in Adelaide. We like to reciprocate the favours.

It started at the level of physical colocation, but clearly we have entered that with a view to the great potential that this relationship can provide. A key point was late last year, just prior to our AGM in December, when we signed a memorandum of understanding with Tourism Australia, which is over a three-year horizon, designed to really work together on some key marketing initiatives both in the domestic market and also in the UK, China, the US and Canada.

This has all come about because there is a confluence of interest here. Tourism have done some detailed studies around food and wine, and it is a key trigger for inbound travel. They have identified that those who come here walk away with a heightened perception, awareness and appreciation for our food and wine offering. But for those who have not been here, the perception is much lower. So, there is a real gap between the two, and if we can bridge that gap and get more inbound tourism, we can get more people visiting both our food and wine offerings. Often with wineries you are combining the two—fantastic restaurants and world-class wines. So there are some real synergies there, and a real alignment of interests. How we are going to flesh this out, in the first instance, is that we have a major event in September in Adelaide called Savour Australia 2013. It is an industry convention to really put a line in the ground and say, 'This is where we are as an industry, and we want to get some renewed interest and excitement around the Australian industry.'

Mr LYONS: How often is that conference held?

Mr Clark : This is an inaugural one. We are investing a significant amount of money and resources, along with Tourism Australia. We are bringing 100 VIPs out—key influences, key people from the trade, from a range of key markets. And there will be industry delegates there—around 800. It is not just a wine convention. It is both food and wine—a world-class affair. We are endeavouring to put on something that people will walk away from saying, 'Wow!' It is just a fantastic offering, and there is so much potential here in the market and in what Australia has to offer. There is heavy involvement from the state winery associations and the regional associations as well. There is going to be a series of state dinners and things like that where they can really showcase their food and wine offering.

So, that is the first plank of it. And then, building on that, we are looking at an in-market consumer campaign, where we will co-invest in really trying to penetrate consumers in some of these key markets. It is very exciting what we are doing with Tourism Australia. I think it is a very natural fit, and we are working hand in glove with them—and, as two statutory authorities, that should be how it operates. It is very productive, and I think it will prove to be very beneficial to tourism, to wineries and to the food industries as well, because they all work together.

Mr LYONS: I was in America in December, and I noticed in one supermarket Australian wines for under $5 a bottle, which surprised me somewhat—I could not have bought it in Australia at that price. That is one point I wanted to make. Another is this: are we doing anything about maintaining standards of the food and wine link? In Tasmania there are some quite nice restaurants with wineries. I think they should somehow get different wines and have fewer retail outlets. The other domestic markets are the big operators, aren't they?—Coles and Woolworths. In Tasmania we probably do not sell many through them, because there is probably not enough of the wine. But I was just wondering how you maintain the standard of the food and wine. Do you have any say in it?

Mr Clark : Ultimately the marketplace is going to dictate that. Our mandate is around building the reputation and giving consumers a reason to buy up the value chain. You commented on the US, for example. That is where a heavy focus has been, and it has been successful for some major companies at the lower end in terms of price points, but there is a real opportunity in the $15 to $20 bracket in the United States. And we can fill that void, and that is a market you want to be in, because it is sustainable and you are generating a good margin. So, that is where we are identifying the opportunity and looking at some of the barriers—at why we cannot get into that segment of the market.

CHAIR: Coming back to the growers' situation: in Australia, are there any supply-chain issues that cause us any worries? Are there problems in that respect? We have dealt with that in the food sector; there are quite a few issues in that area. And some of the gains we will make in the future will be getting some of those things in better condition in Australia. Also, in terms of moving the wine from a rural location in a regional area, where wine grows, and getting it to market and those sorts of things, are there major issues getting wine growers, especially the smaller wine growers in some regions, into the marketplace?

Mr Clark : From a supply-chain perspective, certainly over the recent period, with depressed markets, it has been well known that there have been some challenging discussions between grape growers and wine makers about the price at which they are purchasing their fruit and whether it is sustainable for the grape growing community—

CHAIR: That is the same as vegetable growers in Tasmania talking to supermarkets about the price they get for their product. The producer looks like they are getting squeezed, or they are claiming that they are getting squeezed.

Mr Clark : Yes. I think the producer would argue that it is a challenging market for them as well—and this touches on the other part of your question—trying to get their product into the market with heavy dominance by the two major retailers, and their preparedness to invest heavily in their own brands, which compete on the shelves with the traditional brands, as we call them. So, the producers will say they are getting squeezed, and then that follows down the chain. It has been a difficult market.

CHAIR: Who looks at that? And who says that the ACCC needs to have a look at this? Does your board take this onboard and give any consideration to it, to make recommendations to your minister?

Mr Clark : As I mentioned before, we have a mandate around specific issues. Certainly as we sit around the table there is an interest in these issues, but from a policy perspective the winemakers' federation is the peak advocacy body which takes these issues forward. If there is substance to them we will take them through to the ACCC or other relevant bodies to take them further. It is watched very closely.

CHAIR: But it is an issue out there in wine land, from the producers of wine, the growers of wine, and also the makers of wine, against the retail outlets that exist, and the retail chains having their own brands?

Mr Clark : Yes. Anecdotally, that is always raised as an issue. Moving beyond that level and getting specifics as to what the issues are and what is actually happening in the marketplace has, from my personal observations, been a challenge in the other parts of the food sector. So it needs to go to that level.

CHAIR: What about labour and transport in the sector?

Mr Clark : High costs are always mentioned as well. From a labour perspective, when we are looking at some of our competitor countries—South Africa and Chile, for example—we cannot compete. And we cannot compete as a low-cost producer; that is not where our niche is and that is not where we are going to get the value that we need. It is around the premium end and convincing the marketplace—whether that is through restaurants or supermarkets—to spend up. We want people to know that if they are going to spend more on a bottle of wine they should not by default defer to a top end Italian or French wine. There are reasons to go for some of the Australian wine that is in the market.

Mr LYONS: In Tasmania this year, we had a surplus of grapes. It must have been a pretty good year. Do they move grapes around to, say, South Australia or Victoria? Do you guys get involved in that? My other problem is what we do for exports. Is that a problem for the wine industry in Tasmania? Does that problem come to you? Do you look at it?

Mr Clark : Movement of grapes across the country is commonplace.

Mr LYONS: Is it?

Mr Clark : It is usually for the bigger brands—the multiregional blends. They will often take grapes from a whole range of vineyards and then move them to a central processing plant. This is often for the bigger blends.

Mr LYONS: I can understand Brown Brothers, with the number of wineries that they have in Tasmania, maybe sending some of that back to Victoria. But the little wineries all had an excess of grapes this year. They have to get them off. It must cost them. Is there a market?

Mr Clark : From all accounts. My understanding of Tasmania in particular is that has been a real bright spot. I talked about depressed grape prices. The averages in Tasmania have been well in excess of national averages because of—

Mr LYONS: That is quite natural, of course, because it is Tasmania.

Mr Clark : Yes. There has been a heavy demand for the Tasmanian premium chardonnay and pinot noir fruit for sparkling wine. Indeed, a Tasmanian shiraz won the Jimmy Watson Trophy last year. The Tasmanian production basis is very small, obviously. But it has been very successful. There is a move to try and encourage some more plantings in Tasmania. On a national level, we are trying to constrain the plantings—the national vineyard acreage. There have been some vineyards pulled out recently because we have been in a situation of oversupply. Our view is that we are moving very much into balance now, which leads us to that line around cautious optimism in terms of where we are and how we will go forward.

Mr LYONS: Once upon a time, we could buy bad wines. Now—certainly in Tasmania, anyway—there do not seem to be bad wines. I have not had one for years. Is that a plan? How does that work? There are lots of little wineries, but they are still producing very good wines. Is there a reason for that?

Mr Clark : The reason would be the heavy emphasis on and investment in skills over the last 20 years. Now it is all bearing fruit, excuse the pun, in the sector. We have had a heavy focus on our R&D capability. There are resources on tap to help the winemaking community to deal with any problems that they encounter during the winemaking process. It has been a key focus. One of the key planks of our success has been our ability to innovate and develop technical skills. That is now apparent. The quality of Australian wine across all price points is something that we should as a sector be very proud of.

Mr LYONS: You talked about the quality. My question is about training. Is the training linked with TAFE colleges? In your electorate, Chair, at Tally House they had a training school and 65 went through and did a certificate II in horticulture. All 60 of them got jobs in the wine industry in Tasmania. But in terms of the winemakers—and I know that they used to bring them out from Europe at one stage—is there a training process or system there?

Mr Clark : There are a number of well-known winemaking courses around Australia. I am not being parochial here, but there is one through the University of Adelaide at the Roseworthy campus and at the Waite campus. That is regarded as being one of the top training schools for winemakers.

CHAIR: In the world.

Mr Clark : Yes. It is very highly regarded. Charles Sturt University in Wagga is also a great teaching institution for winemakers. We have built up some really key training facilities. We have also invested. For example, the Australian Wine Research Institute, which is based in Adelaide as well, has been around since the 1950s, I believe. That has been an engine room for supporting the growth of the sector. That is a bit of the capability that—

Mr LYONS: Do they get funding from the winemakers? Do they fund research projects?

Mr Clark : In the wine space, there are two statutory bodes. There is the Wine Australia Corporation, and we undertake everything that I outlined before. Then there is the Grape and Wine Research and Development Corporation, which is one of the research and development corporations established under the PIERD Act. There are similar bodies for grains and cotton et cetera. They are levy funded but they also get matching funds from the government. They invest in research and development on behalf of the sector. A significant portion of that money goes to the Australian Wine Research Institute.

CHAIR: A winemaker told me that you do not have to make any bad wine anymore because of the technology and knowledge that we have. Do you agree with that?

Mr Clark : Yes. There is a shift at the moment also to make sure that the wines express the grapes from the vineyard. Some may have argued that there has been a little bit too much intervention by the winemakers. These are all philosophical debates; there is no objective answer to them. There is a shift towards letting the vineyard express itself. 'Terroir' is the word that is often used. People want the wines to express the grapes in the vineyard. There are always shift in the philosophy around wine, which makes it always an interesting area to work in.

CHAIR: Sure. I want to come back to the conference that you are planning. I understand that Australia brought out many English writers on wine, wine writers who write newspaper and magazine columns. The English had a total commitment to France. But we broke that somehow. Once they started writing how good our wine was, we opened up the market. The UK would still be nearly one of the best markets that we have. Is that the sort of thing that this conference is for? Are you trying to revitalise or renew?

Mr Clark : Sure. Those wine flights are very well-known. You are right: they are regarded as a key reason why Australian wine really took off in the UK. We are still No. 1 in the UK market in the retail setting—in supermarkets et cetera. There is a lot of volume still shipped to the United Kingdom. The margins there are not great. There are a lot of challenging aspects—in particular, the excise tax regime there takes a significant proportion of the price.

CHAIR: The EU stuff, I guess.

Mr Clark : The event, in a way, catches aspects of that, but it is much broader. As I alluded to before, it is not just wine; it is a real food and wine experience that we are trying to embed in the minds of these key influences. So I guess it does hail to that idea, but it is taking it to a whole new level.

CHAIR: We are always trying to keep up with the research corporations in different areas and new technologies that are happening—different universities and different areas of research. Do you collaborate in any way with academic institutions and research areas? Is there new research coming on in different areas that people are looking at that are being funded? Or is concentrated in a narrower area? You mentioned the wine corporation in South Australia.

Mr Clark : It is difficult for me to respond to that query. As I said, it is the grape and wine research body that has carriage of this issue. There is a proposal underway for the two bodies to merge. The minister has given approval to that, and the plan is in about 12 months time to have one body. And then I might be able to speak to some of these issues with more authority. But at the moment the Grape and Wine Research and Development Corporation has carriage of those issues, so it is really difficult for me to speak to that in any detail.

CHAIR: Do they look after the marketing side, or do you look after that?

Mr Clark : That is firmly within Wine Australia.

CHAIR: What research do you do in that space?

Mr Clark : That is a good question. We work with the GWRDC to help get funding for some market related research. For example, we have just commissioned some research in the United States to understand what the blockages through the supply chain are there—why some Australian wine is not getting on the shelves of some key outlets. They have a very complex distribution chain in the United States; it is called the three-tier system. So you need to work through all the levels to get the product in the market. With funding provided by them, we have commissioned an expert in the US to put together a review of some of those blockages and provide some analysis as to what we need to do to break through some of those blockages. So, that is the type of research that we undertake on a marketing basis, often with funding from the GWRDC. We have done similar exercises in China. China has been a very strong market over the last few years, but no-one has a complete understanding of what actually happens in the marketplace, of what happens to the wine once it gets there, of the distribution chain and who is drinking it. Is it repeat purchases? Is it real distribution and real sales, or is it going into one-off gift giving with no chance of follow-up sales? So yes, we do a lot of work in that area.

CHAIR: Do you know any new and emerging areas of the world that we will be competing with? Have they emerged? Is China getting into making wine? In southern China they are growing a fair bit, and also in other parts of the world. There are only certain areas, which I think we explored earlier, where you can grow quality wine. Have those areas been identified?

Mr Clark : China is probably the one to watch out for at the moment. They have significant plantings. In fact, on one level the numbers indicate that they have more vineyards planted than Australia does. A lot of the wine that is produced in China is at the lower end, going to a number of big brands at the lower end with the imported products competing at a different level. But I think over the next 20 or 30 years their production capacity will improve. Some of the bigger companies have a foothold there. Moet & Chandon, for example, have some facilities there. So I think there capacity will improve. It is a bit like crystal-ball gazing, but I think at some point in time they may move up that chain and compete more readily with Australian product and indeed with product from other parts of the new world and even the old world as well. Beyond that, there is always some production base. I was in Brazil last year. They have some reasonable production in the south of Brazil, but they are constrained by climatic conditions. So there is some potential for other emerging new-world producers, but China is probably the one to watch more closely.

CHAIR: And safety and stuff like that seems to give us a good angle in the Asian markets—safe wine. So, the role on research and development is the levy system—the same as our other—

Mr Clark : Correct, and we are also partly levy funded. We get some of the wine and grape levy as an export levy.

CHAIR: There has been a bit of a debate about the public good and whether—and this is not so much in the wine industry as in other industries—it may be a little bit too focused on some people's interests and not on a broader interest. And it has also been said that it goes well, but it can be a restriction, and it is a matter of how to encourage industry in different areas to get involved and invest even more in research and development, because that can give you the future. Do you have any thoughts on that? Have you discussed that?

Mr Clark : I can talk, again, to what we do primarily, which is not across R&D at this point in time. We run a whole range of collaborative activities. We have a levy base which provides some funding, but over and above that a whole range of brand owners will fund us on a voluntary basis. It has been one of the key parts of our success—the ability for competing companies to sit around the table and see the value in collaborative marketing.

Mr LYONS: Is that a recent sort of trend—the last 20 or 30 years? I could not imagine some of the winemakers in the early days in Tasmania necessarily being all that friendly to each other.

Mr Clark : Probably over the 1980s and 1990s they saw the value. With wine, when you go into a retail outlet overseas or look at a wine list, the first criterion is country of origin, and that is such an important cue in purchasing decisions. So, brand owners see value in trying to provide strong messages around brand Australia, which is the service we can provide. And then, underneath that, they can execute their sales, and they can execute their own brand strategies to support their particular products. But they see the value in working on a collaborative basis. We continue to see that in emerging markets—in China, for example. We have a whole range of user-pays activities that we put together, so we will participate in a particular trade show and will divide up the cost amongst the participants. And there has been heavy demand for those activities, because the Australia cue is the important one to be underneath. Consumers do not have a high level of awareness of the Australian regions, for example, or even particular brands—although they may for some more than others; Penfolds, for example, has a high degree of brand recognition in a place like China. But they see the value in coming in underneath that generic promotional banner, which we can provide.

CHAIR: In countries like France and Germany, they sell by region—for example, the Rhine—and they have promoted their regions and the name of the wine. Do we do some of that? Is there any increase in that? Is there any thinking around those things?

Mr Clark : It is an interesting point. Traditionally we differentiated our labelling because the European labels did not tell you what the variety was; they told you the appellation, and you had to know that system well to understand the wine you were drinking. One of our key successes was that our labels were very simple. They said whether it was a shiraz from the Barossa or a pinot from Tasmania, and you knew exactly what you were getting. That helped consumers demystify that world of wine, which can be quite daunting, I think. You go into a retail outlet and see the array of wines and wonder, 'How do I make my decision here?' That said, it has been my observation recently that there has been a bit of a push back to maybe looking at some of the successes of the old world around the reasons for appellations. It is not that we are going down that path in any way soon. But I think, because of the challenging times we have had recently, people will start to reconsider everything we are doing to see if there is a better way of doing it.

CHAIR: Of course. The narrative around food and beverage is pretty significant and pretty important in what you were talking about earlier, and I think capturing that is important. It is important to have your narrative, and people like those things, I think.

Mr TEHAN: I am just looking at where you have your staffing, particularly overseas: you have six people in the UK, five in the US and three in Canada, so that is 14 in the UK and North American market. And then you have two in Japan and two in China, so that is four in North Asia. Given the maturity of the North American and UK markets, has any thought been given to where the growth opportunities are and repositioning some of that to try to take advantage of growth markets, especially in our near region?

Mr Clark : It is a very good question. Those numbers are not quite up to date; it is a historical report, and there has been some shift since then. For example, in China we have three people now, and some of the numbers in the established markets have dropped off slightly. It is a point of ongoing debate internally at the moment. The UK and the US are our No. 1 and No. 2 markets still. Historically we have had a great presence there. And China has come onboard more recently; it is now the fourth-largest market—so, you have the UK, the US, Canada and then China. That is the model that has worked in the past. It is about whether we redesign it according to where we see the future growth opportunities, if the rates of growth have declined in some of those more established markets. We still see some great promise in the US; we still see some really good opportunities there. And I think, from talking to industry, that they similarly see that. The UK is more challenging, for a whole range of reasons. But it has been such a flagship for our success. A lot of the key influences in the English-speaking world are in the US, so we have to continue to engage with them, because it is not only that they may influence the English market but that what they say can have an impact in other markets. So, it is an ongoing debate. We are in fact looking at this at the moment and trying to work out—

Mr TEHAN: Thinking about South Korea and India, where are the markets that have the potential for growth? Have assessments been done of those?

Mr Clark : They have. We talk about some of the key emerging markets as perhaps being Brazil, Mexico and India. There are good prospects in a place like South Korea as well. One of the key challenges at the moment is tariffs. We are seeing that in South Korea with the lack of a bilateral FTA, which has not got across the line yet. All the other major competitors do not face any tariffs into that market.

CHAIR: I was there last year on the trade committee.

Mr Clark : That is challenging. China is, as well. The Chileans and the Kiwis have been able to get tariff preferences into there. In fact, New Zealand is zero and the Chileans are moving to zero in 2015. India is a market where they have got a high tariff wall, no-one has any preferences yet. So we are not behind the eight ball. I know the EU discussions are more advanced, and there has always been chatter around what they may get through that agreement. If they do get an early advantage then, obviously, they will be able to make the most of that. India is a market where people see opportunity, but it is just very hard for you to hit the price points that you have to hit in that market. I have been there once and have seen the prices that the wine has to sell at, and it puts it out of reach for many purchasers.

I was in Brazil last year, as I mentioned before, and it is a challenging market. I was just talking to an exporter from South Australia, Wirra Wirra. They have exported to Brazil and, just to get the product in the market, they found it is not so much the tariff barriers but some of the non-tariff barriers, such as certificates et cetera. I met with the Brazilian authorities to try to facilitate trade and to lower some of these barriers. We are part of a group called the World Wine Trade Group, essentially the new world wine producers, and we have negotiated a whole range of agreements to streamline import processes and remove barriers to trade. I was trying to convince the Brazilians they might want to consider that approach. There is a strong protectionist element there which makes life difficult. There is a whole range of issues at play.

CHAIR: There is the Mercosur group as well, isn't there? I am sure the Argentines would be positioning to—

Mr Clark : Exactly. In a place like Argentina, they do not face any tariffs into Brazil because of Mercosur. We have challenges there.

CHAIR: Thanks very much, we really appreciate your time. Good luck with your work and I hope your conference goes really well. Are you calling it a conference?

Mr Clark : It is called Savour Australia. It is an industry convention.

CHAIR: Good luck with it. If somebody could move that the committee authorise publication of the evidence given at its public hearing today, including publication on the parliamentary electronic database and the proof of transcript.

Mr LYONS: So moved.

CHAIR: Thank you. I have minutes No. 72 of Thursday 30 May 2013. If somebody could move that those minutes be accepted.

Mr TEHAN: I will move them.

CHAIR: Thank you.

Mr LYONS: I can second them.

CHAIR: Thank you.

Committee adjourned at 18:18