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Australia's wine industry: international opportunities and challenges. Speech to open the 2001 Wine Industry Outlook Conference, Adelaide:

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Department of Foreign Affairs and Trade Speech

Speech by the Hon Alexander Downer, MP, Minister for Foreign Affairs, to open The 2001 Wine Industry Outlook Conference Adelaide, 13 November 2001

Australia's Wine Industry: International Opportunities and Challenges


Alister Purbrick, Industry leaders, Ladies and Gentlemen,

Thank you for your kind introduction, Alister.

It is my great pleasure to welcome you all to Adelaide, my home town - and heartland of the Australian wine industry - as host of the 2001 Wine Industry Outlook Conference.

In 1838 wine cuttings were brought from the Cape of Good Hope and planted just few miles from here in the McLaren Vale district.  Today South Australia accounts for just under half Australia’s total wine grape production, and encompasses famous production areas such as McLaren Vale, Barossa Valley, Clare Valley, Coonawarra, Padthaway and Langhorne Creek.

It has been an exciting year for Adelaide and wine.  One of our greatest wineries, Penfolds, won Great Value Red Wine of the year at the prestigious International Wine Challenge for the 1999 Koonunga Hill Shiraz Cabernet, following up on earlier successes with the Bin 28 Kalimna Shiraz.  Penfolds’ winemaker John Duval was named Red Winemaker of the Year, for the second year running.  And Grant Burge won two gold medals at the IWC for the 1996 Meshach Shiraz and 1997 Holy Trinity Grenache Shiraz Mourvedre.

These international accolades are but examples of the great depth of South Australian wines, coming on top of the Red Wine of the Year award won in London last year by Peter Lehmann’s 1998 Barossa Shiraz.

South Australian wines have swept the premier wine shows in Australia:  McWilliam’s Brand’s of Coonawarra wines in Melbourne, Sydney and Perth; The Lynn family’s Majella wines in Brisbane; BRL Hardy’s Leasingham and Peter Lehmann wines in Perth and Adelaide; Penfold’s much anticipated Barossa Valley Shiraz in Sydney.

Last month we hosted - for the first time in Australia and with great success - the World Congress and General Assembly of the OIV.  I had the opportunity to welcome industry leaders from global centres of wine production - Europe, the Americas, South Africa and New Zealand - as well as from across Australia.

But the last thing I want to be seen as today is parochial or somehow biased toward our local vintages or capacities as international host!  We have, of course, extraordinary depth, breadth and diversity in wines across Australia, reflecting a love of wine and European wine making traditions, blended with a strong technical and research capability and an uninhibited willingness to try new ideas and approaches.  The

result, most importantly of course, is there for us to drink and enjoy (!).  But it is also there to show the world what we have achieved.  And it has brought Australia into new repute overseas with an outstanding export performance over recent years.

So aside from singing the praises of South Australia - and given my portfolio responsibilities - I want to set out for you this morning some of the international challenges and opportunities facing our industry.

The Australian Wine Industry

Grape growing and wine producing in Australia date back to the arrival of European settlers over 200 years ago.  However, it is probably true to say that it is only in recent decades that the rest of the world has taken much notice of our wine.

The Australian wine industry has undergone a very significant expansion in a relatively short period of time.  In fact, in Australia since 1990:

wine production has increased from 383 million litres to 806 million litres; ● grape plantings have increased from 60,000 hectares to more than 139,000 hectares; and ● annual exports have increased from 38 million litres or $121 million, to around 354 million litres or $1.7 billion - a 10 fold increase in volume and 14 fold increase in value.  ●

Outside Europe, Australia is now the world's largest exporter of wine.  We have come a long way since 1975 when Australia was a net importer of wine.

So why has Australia enjoyed such success?  As you would expect, the answer cannot be put down to any one single factor.  Apart from the hard work of many talented individuals in our wine industry, Australia's success can be attributed to a number of factors:

a united industry, with a shared vision of where it wants to go and a broad strategy to achieve it; ● the technical expertise of our wine personnel; ● a culture that encourages innovation; ● quality viticulture and oenology education and training facilities; ●

a diverse climate and landscape; and ● a strong focus on the needs and preferences of consumers. ●

Of course, our success needs to be kept in perspective.  Australia has been, and remains, a small wine player globally, accounting for only about 3 to 4 per cent of the world’s wine trade.  And Australia is not the only country that has enjoyed recent success.  A number of others, including many represented here today, can point to similar results.

The giants of the world wine scene - France, Italy, and Spain - remain dominant.  Together they produce 54 per cent of the world’s wine and account for over 64 per cent of wine exports.

International competition is intense.  The challenges facing all producer countries over the next few years will be significant.  This will be especially the case as the world begins to feel the effects of a possible oversupply of wine - from which there will be additional pressure on grape and wine prices, and subsequent impacts on profitability.

Accordingly, wine businesses these days spend considerable time and effort, not to mention expense, in

identifying the changing tastes of consumers as well as promoting and marketing their products.  This is also becoming an increasingly demanding exercise, as consumers become more educated and discerning.  They will not buy products that do not meet their expectations in terms of quality or price.

Further adjustment within the wine and grape sector is inevitable.   Individual producers will continue to seek to improve the cost competitiveness of their products.  But we will also see continued pressure on some governments to provide further financial or other support to their domestic producers.  This is something that Australia, as a major exporter, will be keeping a weather eye on, particularly as the agriculture negotiations begin in earnest at the WTO.

Market Access

Which brings me to market access.  One essential prerequisite for the long-term economic sustainability of the Australian wine industry is the ability of producers to access markets — domestic and international. 

Traditionally, countries that produced wine also consumed wine.  Only one tenth of global sales were across national borders, and most of this with near neighbours.  In more recent years, however, this figure has increased to over one quarter of all sales. 

Wine is thus becoming much more an internationally traded product.  In Australia's case, some 47 per cent of total wine sales are in export markets, up from 11 per cent in 1990.

In 1996 the Australian industry set itself ambitious targets for access to key established wine markets - the United Kingdom, United States, Germany, Sweden and Japan - and high income and emerging Asian markets - Hong Kong, Singapore and Taiwan, and Thailand, China, Vietnam and India.

By 2001, the industry projected, exports to the UK would be 90 million litres, or $291 million.  Exports to the United States would be 35 million litres, or $163 million.  Exports to Germany would be 12 million litres, or $41 million.  Exports to Sweden would be 14 million litres, or $34 million.  And exports to Japan would be 10 million litres, or $40 million.

Overall, the industry forecast, Australian wine exports would total 259 million litres, or $896 million.

Well, you have surpassed yourselves.

In September this year, exports were the highest on record - 44 million litres, worth $193 million, was exported in just that one month.  Indeed, for the year ending September 2001, Australian wine exports totalled 354 million litres, or $1.68 billion.  Our global exports have grown 18 percent by volume, and 19 percent by value, in the last year alone. 

We are now exporting more than we produced ten years ago.

Growth in North American markets, in particular, has been phenomenal.  Instead of the projected 35 million litres, we instead exported 71 million litres - worth $431 million - to the United States in the year ending September 2001 - growth of 30 per cent on volume, and 26 per cent on value, over the previous year.  The Canadian market, similarly, experienced growth of 17.3 percent on volume and 24 percent on value.

The UK market continues to perform extremely well for the Australian industry.  Australia’s export

performance almost doubled the 1996 projections - with some 173 million litres, worth $715 million - of Australian wine bought (and presumably consumed!) in the UK in the past year.

For every bottle of Australian wine exported, roughly speaking, Australia has earned about four dollars.

All this success is not to say, however, that there are not opportunities - or challenges - elsewhere.  The Asian financial crisis put a big dent in projected growth in markets such as Singapore and Hong Kong.  Japan remains a depressed market.  The shift of mood in these countries - not just amongst consumers but also in the appetite of governments for market opening - remains a key challenge for industry and government alike.

The growth in the international wine trade - and the challenges in new and emerging markets - highlights the fundamental importance of market access for Australian producers - and ultimately, of course, for Australian consumers.

Market access is not just about lowering - or removing - traditional barriers to trade.  It is also about disciplines on that trade.  Fair, transparent and stable rules are particularly important.  They not only benefit producers by expanding the market potential for wine, but also consumers by providing them with greater choice both in terms of product range and price.

We will be working hard in the forthcoming round of multilateral trade negotiations at the World Trade Organisation, not only for increased access and reduced levels of support and protection in export markets, but also for certainty, transparency and stability in the wine trade.

Old World versus New World

There has been recent media reporting of a growing divide between so called 'new world' and 'old world' wine producing countries — of two armed camps and an impending global wine war — and of moves by countries to erect trading barriers.  

This claimed divide between “new” and “old” worlds is overstated, particularly given the wide range of techniques and practices already used by wine producers around the world.  No one country has a monopoly on tradition or the use of modern technology.  It also ignores the fact that competitors are not limited by geography.

We have argued consistently that the wine sector in Australia, and many other new world producers for that matter, is the product of the efforts of European settlers and successive generations to adapt to new and relatively untested environments.  We have pointed out that this has led, over time, to approaches that vary from those traditionally employed over the centuries by European-based wine makers.

New world wine producers will be meeting shortly in Toronto to sign an agreement on mutual acceptance of oenological practices.  The New World Wine producers’ group is not only an expression of cooperation and innovation amongst new wine producers.  It is also a powerful expression of solidarity amongst countries that are determined to ensure that new barriers to trade in wine - including through intellectual property, subsidies and labelling - never see the light of day, and that existing barriers are reduced or eliminated.

In the end globalisation will reduce rather than exacerbate any old world-new world differences.  Current debates over issues such as geographical indications will one day be seen as anachronistic - an old

mindset in its dying days.  Why?

Firstly, global integration of businesses will continue .  All of you will be aware of the trend towards multinational operations and greater consolidation within the industry.  One of our largest wine companies, Orlando Wyndham, is owned by the French-based Pernot Ricard.  On the other hand, Australian wine companies have in recent years acquired operations in Europe and elsewhere around the world.


Labour is increasingly mobile.   Many wine makers and viticulturists train, advise and work for wineries and vineyard operations outside of their home country.  This cross fertilisation of ideas and experiences should encourage a greater understanding and acceptance of the various approaches employed in grape growing and winemaking.


Wine businesses cannot afford to ignore proven recipes for success, even when the source of those ideas does not completely fit with traditional approaches.  This could include the applications of new technologies or approaches to marketing and distributing wine products.


Nevertheless, we need to be alive to the push by some to categorise and label wine based on whether it is assessed to be an industrial or manufactured product, or of an agricultural or natural disposition.  This debate has no scientific or technical merit, and if pursued further, will only serve to create further, unnecessary, international divisions.  I can assure you that Australia, for one, will be leading the push against protectionist sentiment in Europe and elsewhere.


Today should be seen largely as a celebration.  I think you have cause to celebrate some very real and impressive achievements over the past five years.

But now comes the next phase of the Australian wine industry’s long term vision.  During which there will be some serious challenges as well as opportunities: international uncertainty; new and continuing negotiations in the multilateral trading system; a weakening global economy; the likelihood of softening demand in key markets; the prospect of a global oversupply of grapes and wine; and adjustments in global as well as domestic production, ownership, distribution, marketing and consumption.

That these are serious challenges is beyond doubt.  That the Australian industry is well placed to see them as opportunities and continue to thrive is also beyond doubt.

I wish you all well in your endeavours.

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