Wine producers

The Wine Industry Directory’s own data, collected from its long-running annual survey, reveals an accelerating decline in the number of Australian wine producers in 2016, despite the strong improvement in business conditions (Table 9). A total of 76 wineries closed in the past year, bringing the decline in numbers over the past three years to 179, or 7% of the industry total. The number of wine producers is at its lowest level since 2008.

The number of wineries reduced in all states in 2016, with the largest declines in Victoria (25) and NSW/ACT (22). In South Australia, only seven wineries closed, which puts it on track to overtake Victoria as the state with the most wineries if current trends continue.

A breakdown of winery numbers by size (Table 10) helps to make sense of the large number of exits from the industry in a year that delivered the best business conditions in almost a decade. The decline in numbers occurred exclusively among small producers with an annual crush of less than 250 tonnes. Victoria is bearing the brunt of this trend because it is home to one third of all Australian wineries of this size (Table 11). By contrast, the number of producers around the country with a crush of more than 1,000 tonnes actually increased, up from 114 to 120. These figures highlight that the wine industry in 2016 operated at two speeds: for medium and large wineries with exposure to surging export markets, the past year delivered good times, but small wineries that relied on domestic sales continued to be caught by low prices and came under even greater pressure. It is an overlooked fact that only 48% of Australian wine producers are exporting their products (Table 14).

The majority of listed wine companies (72%) were established after 1990 (Table 12). The 1990s proved to be the boom years as 913 of the existing wine companies were established in that decade. Several wine companies and brands have been in business for 150 years or longer.

The Directory also reveals some interesting trends in business practices by wine companies (Table 14). The number of companies with a cellar door outlet continued to fall in 2016, but the steep decline since 2011 appears to have bottomed out. Less than two thirds of all producers across the country now operate a cellar door, compared to almost 80% a decade ago. Cellar door outlets are found at nine out of 10 wineries in Queensland, but in South Australia, barely more than half of all wineries continue to operate a cellar door (Table 15). Wine companies are now relying heavily on websites and making greater use of social media, as reflected by an increase in wine producers with a Facebook page from 31% to 36% in the past year. Twitter is also of increasing importance, and is now used by 21% of wineries, up from 18% a year earlier.

In other business trends, the percentage of wine companies making fortified wine remains steady at about 28%, but those making sparkling wines continues to grow and now stands at 42%, up from 39% two years ago and only 29% five years ago.

Wine producer industry rankings

The Wine Industry Directory’s ranking of Australia’s top 25 wine producers (by volume of wine produced) underwent a number of changes in 2016, mostly outside of the top 10 (Table 20). Accolade Wines easily retained its mantle as Australia’s largest wine company in terms of volumes produced. The company has grown aggressively over the past year as part of a drive to create the maximum value for its private equity owner, CHAMP, which recently announced plans to sell the company in 2017 via an initial public offer and listing on the ASX. The only change in the top 10 was Treasury Wine Estates overtaking Casella to become the second largest wine producer. Casella performed strongly and benefited along the way from a string of acquistions in recent years, including Peter Lehmann Wines, Brand’s Laira and Morris Wines, but Treasury Wine Estates was in a better position than all other wine producers to ride the emerging export boom.

Among the medium-sized producers, there were gains in the rankings made by a number of companies, including Zilzie Wines and Brown Brothers. There were also strong debuts in the rankings by Byrne Wines and Calabria Family Wines. Idyll Wine Co., the former winemaking business of Littore now owned by the Costa Group, entered the list ranked in 15th position.

In terms of revenue, the top 20 ranking takes on a slightly different complexion (Table 21). Producers with a high proportion of branded sales and strong export performances rise to the top of the revenue list at the expense of companies with greater reliance on lower-value bulk sales. Treasury Wine Estates is the clear leader with sales of $1,246 million. Pernod Ricard Winemakers ranked second with estimated sales of $570 million. While the company does not participate in the Wine Industry Directory survey, its public accounts revealed sales of $518 million in 2015, which has been used as basis for this year’s estimate. Similarly, third ranked Accolade Wines lodged accounts showing revenue of $486 million in 2015, which is estimated to have climbed to $559 million in 2016. In making these estimates, it has been assumed that Accolade’s revenues grew by 15% in 2015, versus only 4% for Pernod Ricard Winemakers. More light will be shed on the revenue leaders of Australia’s wine industy when Accolade releases a prospectus in the first half of 2017 for its initial public offer to investors.

In other changes to the revenue league table, Kingston Estate Wines overtook Angove Family Winemakers to rank in 12th position, while Zilzie Wines was the biggest improver, up from 18th to 15th, following strong growth in winegrape intake the previous year. Berton Vineyards lifted its ranking by one position, while Calabria Family Wines entered the table in 20th position.

Total revenues of the top 20 wine producers increased by 9% or $345 million to an estimated $4,066 million in the year to June. Growth in revenues was concentrated among the top five producers – Treasury Wine Estates, Pernod Ricard Winemakers, Accolade Wines, Casella Wines and Australian Vintage – although 95% of the top 20 reported an increase in sales

The Directory’s ranking of winegrape intake (Table 19) provides an indicator of next year’s movers in the wine production and revenue tables. While there was little change in the overall rankings, a number of companies reported strong growth in winegrape intake in 2016. Kingston Estate lifted intake by 23% from 69,000 to 85,000 tonnes, and will be challenging for a postion in the top five if it maintains this growth rate next year. Zilzie Wines boosted intake by 20% to 52,522 tonnes, which followed a 26% surge a year earlier. Brown Brothers, Wingara and Berton also grew significantly, with intake rising by 22%, 20% and 9% respectively.

While the intake of a number of medium-sized producers increased at double digit rates, the top five producers strengthened their dominance of the industry. Winegrape intake by the top five increased from 51% in 2015 to an estimated 55% in 2016, which reflects acquisitions by the major companies in the past three years and their competitive advantage versus medium-sized producers in funding the development of export markets.

The strength gained by Australia’s largest producers through their exposure to international markets is highlighted by the Directory’s league table of exports by value (Table 17). The top five producers accounted for an estimated 76% of Australia’s total export sales, up slightly from 75% a year earlier. Treasury Wine Estates continues to dominate the export industry, with almost twice the value of exports of its nearest competitor, Casella, and an almost 36% share of national export sales.

Treasury Wine Estates also remains Australia’s biggest producer in terms of vineyard area, despite a decline from 9,133 hectares in 2015 to 8,865 hectares in 2016 (Table 22). Casella ranks second with 3,200 hectares and is aggressively adding to its company-owned vineyards, including an extra 420 hectares through the acquisition of Howcroft Vineyards near Bordertown in early 2016. Australian Vintage ranks third with 2,300 hectares, followed by Duxton Vineyards (formerly Littore) with 1,850 hectares and Pernod Ricard Winemakers with 1,662 hectares.

There was no change to the processing capacity in the past year (Table 24), but new capacity is due to come on stream in 2017 following Accolade Wines’ investment of about $40 million to expand its 220,000 tonnes-per-annum plant at Berri. The move will allow Accolade to bottle all its own wines in Australia. Currently, Treasury Wine Estates bottles a number of brands for Accolade in Australia under a reciprocal arrangement that sees Accolade bottle for Treasury Wine Estates at its large facility in Bristol in the United Kingdom.

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