Report Highlights: 

Production for the 2014 Australian wine vintage is forecast to fall slightly from 2013 levels to 1.5 million tons of grapes which equates to just over one billion liters of wine. Yield is also expected to fall to 10.6 MT/ha due to difficult seasonal conditions over the past year.

Production: 

Production for the 2014 Australian wine vintage is forecast to fall slightly from 2013 levels to 1.5 million tons of grapes which equates to just over one billion liters of wine. Yield is also expected to fall to 10.6 MT/ha due to difficult seasonal conditions over the past year. In areas of New South Wales (NSW) which were not affected by frost and heat, growers are reporting a possible ‘once in a decade’ year for wine production. Harvest began two weeks earlier than usual and picking conditions were perfect. In other areas, however, bad frosts and hail have resulted in losses of up to 30%.

Consumption 

On average, about two-thirds of Australia’s wine production is exported, with the balance consumed domestically. According to the Australian Bureau of Agriculture and Resource Economics and Sciences (ABARES), total sales of wines (table, sparkling, carbonated and fortified) fell slightly in 2012/13 to 453 million liters.

Sales of Australian bottled wine were up by 7.5% in 2012/13, domestic sales of wine in soft packs and in bulk fell by 3% and 23% respectively. Sales of sparkling wine rose 1% (to 35 million liters. Bottled wine is growing in dominance in Australia as glass bottles are viewed as the more ‘premium’ packaging. Australian’s are consuming less wine in general, but are prepared to pay more for a higher-quality wine.

Trade 

Exports

Exports in 2013, at 711 million liters, were 3% lower than the previous year. ABARES forecasts exports to rise to 711 million liters in 2013/14. Once the Korea Australia Free Trade Agreement is signed, additional exports to Korea can be expected as wine tariffs will immediately drop from 15% to zero.

Imports

Australia imported an estimated 87 million liters of wine in 2013, an increase of 3% over the previous year. Over the same period, imports from the U.S. increased by 33%, with the vast majority of this increase made up of shipments of bottled wine. The U.S. is the tenth largest supplier of wine to the Australian market.

Post forecasts imports to grow slightly in 2014 to 90 million liters.

Taxation Policies

Wine Equalization Tax (WET) – The WET is a value based tax which generally applies on the last wholesale sale of wine, usually between the wholesaler and the retailer. Wine producers, importers and wholesalers normally have to pay WET, rather than retailers (because WET is usually included in the price retailers pay for the product). 

WET only applies to certain types of products that have an alcohol content of over 1.15%, specifically grape wine, grape wine products, fruit or vegetable wine, cider, perry, mead and sake. WET applies to both bulk and packaged wine.

Good & Services Tax (GST) - is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. Generally, businesses and other organizations registered for GST will: 

• include GST in the price of sales to their customers

• claim credits for the GST included in the price of their business purchases.

So although GST is paid at each step in the supply chain, businesses do not actually bear the economic cost of the tax. The cost of GST is borne by the final consumer.

Marketing

International: Wine Australia has developed a marketing strategy and brand to “recapture the excitement of the Australian wine category,” to evolve their global position towards a stronger perception of quality, diversity and value. ‘A+ Australian Wine’ is the brand underpinning this strategy and it focuses on education, engagement and energizing the Australian wine category across all price points and in all markets. It will be based around communication and telling the world that there is more to discover about Australian wine. The new brand and strategy aims to “engage and excite audiences to choose Australian wine” and will be underpinned by consumer and retail activity, social media and marketing and communications events in all markets. Wine Australia runs specific marketing programs in Canada, China, Ireland, Japan, the UK, Europe (including Germany, Denmark and Sweden), and the U.S. and is working on strategies to develop emerging markets including Singapore, South Korea, India, Brazil and Russia. 

Through these programs, Wine Australia seeks to educate and engage consumers, wine educators, sommeliers, distributors, retailers, commentators, journalists and other key influencers through a range of initiatives in each market. Major initiatives include: 

• Media relations and public relations

• Digital communications including websites and social media

• Events in collaboration with industry partners, as part of user pays Market Programs, including: master classes; wine tastings; trade shows; and promotions.

• Educational programs such as the A+ Australian Wine School, Sommelier Immersion Program, One Day Wine School and Visitor Program

• Advocacy

• Consumer promotions

• Partnership

• Australian Wine Overseas program

Tariffs

In general, the tariff on wine entering Australia is 5% and 4% for developing countries. Under the U.S./Australia Free Trade Agreement, U.S. wine is not subject to a tariff except for the following tariff lines which are subject to a rate of A$78.44/liter of alcohol: 2204.10.23; 2204.10.29; 2204.10.83; 2204.10.89; 2204.21.30; 2204.21.90; 2204.29.30; 2204.29.90