Wine Industry Figures from 1996

Industry: Winegrape Production

Industry: Winemaking

1. Wine Industry - North East Region:

BRIEF HISTORY

Wine has been produced in North-Eastern Victoria for 140 years. Towards the end of the 19th century, Rutherglen accounted for half of Victoria's plantings, or, expressed another way, one quarter of the national output. However, phylloxera struck in 1897, and it was not until 1905 that resistant root stock was available. Nevertheless, by the end of World War 1, there were 100 wineries in and around Rutherglen. By 1930 they had reduced to 60 in number.

The depression, World War II, the wool boom, and bad years in 1955-56 led to further closures. By 1963, there were only a dozen wineries left. Intensive promotional activity was commenced soon after, and combined with changes in technology and the boost in wine, led to a greater interest in the North East. This was offset to some extent by the fashion change from fortified to table wines.

In the last decade or so, the North East has done well through promotion of premium wines - especially through the Winery Walkabout weekend in June (an event attracting an estimated 13,000 people) and through developing grape production in the cooler Ovens and King Valleys.

Source: Oke 1995.

This report includes :

• Location of the Industry
• Structure of the Industry
• Grape Growing
• Wine Making
• Value of Production
• Employment
• The Importance of the Industry to the Region
• Issues for Industry growth
• Impediments to Growth
• Issues for Regional Forum
• Source of Information
• Key Contacts

2. Location of Grape Growers and Winemakers:

The wine industry is concentrated in five areas within the North East region:

• Rutherglen
• King Valley , Milawa , Oxley
• Alpine Valleys, Bright , Myrtleford, Rosewhite, Beechworth , Mt Beauty
• Taminick
• Mansfield

3. Structure of the Industry

The industry is made up of two sectors, wine grape growers, and wine makers. In all there are 32 wineries in the region and 78 specialist grape growers, an overall total of 110 enterprises. All wine makers are required also to produce grapes. Most also buy in grapes to supplement or complement their own range. Specialist grape-growers range in size from small family based operations to substantial vineyards.

By contrast, the wine makers range from very large diversified and integrated companies such as Brown Brothers, (who own a winery and four vineyards, and who also grow grapes at Swan Hill); to the very small, one man facilities.

The number of firms engaged in both sectors of the industry within each region is documented in Table 1. This information was obtained by interview with key growers and wine makers in each region. The dominance of Alpine Valleys and King Valley as grape growing areas is clearly seen. The relative impact however of major winemakers is not obvious from this information.

Table 1

Number of Firms by Region

4. Grape Growing

The grape growing sector in the North East Zone is an interesting mixture of long established, large, wineries with their own vineyards, and of new firms (some yet to produce grapes), of small scale; and (in the Ovens Valley in particular), tobacco farmers either diversifying or moving right out of their former occupation - some will not be producing grapes until 1996 or 1997. (Oke 1995).

A recent study by Orr and Ray documented in the report by Oke 1995 documents the strength of the North East zone as a grape growing area. . The suitability of the North East for premium cool climate grapes for premium wines can be seen. Growth prospects are excellent, and will provide long term employment opportunities for entrepreneurs, as well as offsetting, the inevitable decline in investment and employment due to the anticipated demise of the tobacco industry.

5. Wine Making

There are 32 wineries in the north eastern region of Victoria. A detailed profile of north east wineries is presented in the Oke report commissioned by North East Victorian Wine growers Association.

From surveying done by this Agribusiness data collection project, and from the Oke report, and the report of Pickett, there are forecasts of growth in the winemaking sector. Larger firms are predicting growth of 5% pa while some smaller wineries are planning for very significant expansion in the 5 year period. Other wineries have no expectation for growth.

In one region, (King Valley) there are four grape growers currently establishing licences for wine making and to establish premises locally for promotion and sales. There are opportunities for winemaking in Alpine Valleys but there is no evidence to suggest the necessary investment will take place in the immediate future.

6. Annual Production

Based on information supplied by key industry figures to this project, and published reports (sources indicated) annual winegrape and wine production within the region is listed in Table 2. The production of wine grapes in North East Victoria was 14,720 tonnes and 14 million litres of wine was produced. (fortified and premium table wine).

Table 2

Production by Region 1995

* Source: Pickett 1996.

7. Value of Production:

Winegrapes are variously valued at $1000-2000/tonne. The quality of grapes, variety, supply and demand factors, all impact on price. Key figures in the industry project a decline in the price of wine grapes in the next few years of magnatude 20-25%. This will dampen the optimistic outlook in the industry in the short term.

Wine production from this region is generally in the premium end of table wine market with values of $8-20/bottle quoted by wine makers.

Based on an average figure of $1200/tonne the wine grapes (only one producer quoted prices of $2000/tonne) and total wine grape production for the region of 14720 tonnes, the gross value of the wine grapes industry to the region is $17.7 million.

Wine produced in the region is sold as:

(i) Cask wine valued at $2-3/litre.

(ii) Wholesale bottled wine, valued at $5-7/bottle.

(iii) Cellar door sales, valued at $12/bottle.

An estimation of the value of the wine industry is based on information from key growers about the relative size of these markets.

In construction with key winemakers about the relative size of each of these markets the value of wine production is estimated to be $110 million.

Winegrapes are exported from the North East region, and given the value of exported grapes plus the value of wine produced, the value of the wine industry to the region. is $118 million.

Most of the value of winegrape growing is retained in the region by the growers, as most are independent farmers. However, the returns for processing the grapes into wine are not necessarily returned to the region.

Some of the larger wine companies based outside the north east region have substantial interests in wineries in the area. Pickett 1996 quotes a situation at Taminick where only 40% of the value of wine production is retained in the local area or in fact theNorth East region.

The situation in Alpine Valleys is of interest. 90% of the wine grapes produced in the Alpine Valley area are processed outside Alpine Valleys. 50 -60% of winegrape production is processed outside the north east region, the remainder are processed at Milawa and Rutherglen.

In contrast, the industry at Mansfield is compact ie. 1 winery and 6 grape growers, 90% of grapes produced are retained in the region, with a net transfer of grapes out of the Mansfield region of approximately 10% .

In the Rutherglen area, there are 4 sole grape growers. Two supply wineries outside the region. Winemakers indicate that less than 5% of grapes processed for wine are brought from outside the area. 95% of wine grape production is processed locally.

In the King Valley\Milawa region 44% of grapes are processed in the valley (95% of production is in fact processed by one winemaker). The remainder is exported to other parts of Victoria (26%), NSW (26%) and South Australia (4%).

However, substantially more grapes are processed in the Milawa\King Valley area than are produced in these valleys. One winemaker purchases 70% of winegrape requirements from outside the Milawa\King Valley area.

Thus, in summary, nearly 60% of King Valley wine grapes are "exported" and at the same time close to 70% of grapes required for processing in the Milawa, King Valley area are "imported". This is a clear demonstration of the complex nature of supply within the industry.

In North East considering wine grape and wine production and the value of these enterprises, it is very easy to double count as grape growing and wine making activities are often integrated and interdependent, and although there are constraints (eg. Phylloxera) there is substantial transfer of grapes (- crushed or otherwise), and wine within and outside the region. Care must be taken to both understand the nature of the supply within the industry and to interpret the figures.

8. Employment

The wine industry like many horticultural industries is relatively labour intensive, especially in cool climate grape production. Seasonal labour requirements include pruning and picking. Some skill is needed in pruning and care can result in better yields. The cost and administrative requirements associated with seasonal labour have been identified as significant issues by vineyard managers.

Wineries have more stable labour needs usually a mixture of full and part time employment. A survey of the employment needs of winegrape growers and winemakers is summarised in Table 3.

Table 3

Employment by Region

9. The Importance of the Wine Industry to the Region :

This industry with investment exceeding $40m, an annual wages bill of $14m, purchases of $37 m, sales of nearly $50m, stock of $30m and employing about 1200 people is a clearly a major industry source in the region. (Oke 1995).

The economic value of this industry is largely returned directly to the regional economy and research indicates the benefits accumulate with a multiplier effect of 2.4 to 3.0. Added to this the tourism and wine industries, especially in Rutherglen and Milawa are closely allied.. There is an increasing awareness and focus on this partnership in the Delatite and Alpine Shires.

The importance of cellar door sales in turnover of smaller less export orientated wineries reflects the significance of tourism to the industry.

Extracted from the Bright Report