Wines of Victoria - Vintage 2010

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					                           vintage 2010
strategic plan for the victorian wine industry 2006–2010
           Vision                                          Mission

    In Victoria, winemakers and wine                By 2010 the industry will grow the total sales
    grape growers are committed to quality,         value of Victorian wine by 42 per cent to
    environmental awareness, and to international   $1.8 billion through expanding the domestic,
    leadership in the production of premium wines   export and winery tourism markets to achieve
    which reflect the unique diversity of           sustainability of the industry.
    our regions.

1                                                                                                    1

Vintage 2010: Strategic Plan for the Victorian           a means of achieving a sustainable future. As
Wine Industry 2006–10 is the second five-year            the cornerstone for building the presence and
plan for the Victorian wine industry. The previous       reputation of Victorian wines in Australia and
Vintage 2003 Plan exceeded its ambitious growth          overseas, Vintage 2010 promises a new ‘Wines of
target of $1 billion in total sales for Victorian wine   Victoria’ brand that will enable our producers to
within the planned period. Vintage 2010 sets a           set themselves apart in today’s wine market.
new goal of $1.8 billion in sales over the next five
years – an equally ambitious target given the more       The Government will support the development of
competitive environment now facing Victorian             the ‘Wines of Victoria’ branding and the Vintage
wine producers.                                          2010 promotional programs, through a grant
                                                         of $200,000 to the Victorian Wine Industry
Not surprisingly, the Victorian industry is feeling      Association, and a further $60,000 for the delivery
the effects of the rapid growth in winegrape             of education programs in wine business and
and wine production. An oversupply of red wine           marketing skills, as announced in the Moving
is exerting downward pressure on the price of            Forward initiative for Provincial Victoria in
red wine and grapes and this supply–demand               November 2005. Together with industry
imbalance is likely to continue in the medium            co-funding, these grants will encourage the rapid
term. Twice the number of producers are now              implementation of Vintage 2010’s key initiatives.
vying for their slice of the market compared             These initiatives, combined with our existing
to 10 years ago. Export markets are also more            financial support for food and wine tourism
competitive due to world supply levels and greater       development and marketing, the Exhibition of
competition from other Australian wine exporters         Victorian Winemakers, the annual program
as well as from traditional and emerging wine-           of wine export missions and trade fairs, the
producing countries. Nevertheless, Victorian             Federation Square Regional Wine Showcase series
wine exports are growing rapidly, reaching $525          and the Great Wine Capitals: Global Network,
million in 2005-2006 and almost doubling over the        demonstrate the Government’s commitment
three years to June 2005.                                to Victoria’s wine industry as a priority sector
                                                         because of its contribution to regional economies
However, more needs to be done to promote                and to the value of Victoria’s exports.
Victoria’s unique range of wine styles from across
its 22 wine regions if our producers are to prosper      I commend Vintage 2010: Strategic Plan for the
and grow in such an intensely competitive climate.       Victorian Wine Industry 2006–10 to Victoria’s
All market sectors will be important in finding          winegrape and wine producers for their support
outlets for Victoria’s wine production. Smaller          and adoption.
wineries will rely on increasing distribution in
restaurants, specialist wine retailers and growing
their winery tourism markets. Medium and larger
wineries need to build national distribution in          Hon John Brumby MP
the retail sector and increase their exports as          Minister for State & Regional Development

Vision                                      1
Mission                                     2
Foreword                                    4

Executive summary                           7
Victoria’s wine industry                    10
Recent industry performance                 11
Industry outlook                            12
Key issues - the voice of industry          13

Growth drivers and challenges               14
Exports                                     14
Shift in demand to lower-cost winegrapes    14
Overhang of cool-climate red winegrapes     15
Red or white wine?                          15
Domestic market discounting                 16
Consolidation of liquor retailing           16

Strategic plan 2006–10 - Key Outcomes       18
Objectives and actions                      19
Acknowledgements                            30
             Executive summary

The Victorian wine industry has doubled in             • Growing the market for Victoria’s premium           The management of the ‘Wines of Victoria’
size in the last decade. The rapid expansion in          wines through promotion in the winery               branding program and the development and
vineyard plantings and wine production between           tourism, cellar-door, restaurant distribution,      implementation of promotional strategies for the
1999 and 2003 has resulted in an oversupply of           specialist retail and export sectors.               retail, restaurant, winery tourism and export
red winegrapes and wine, lowered winegrape and                                                               markets will be undertaken by a Vintage 2010
                                                       • Better managing business costs.
wine prices and contributed to lowered profitability                                                         task force under the leadership of the Victorian
for grape growers and winemakers. As well, the         • Continuing to produce consistently high-quality     Wine Industry Association, with representation
expanded number of new (particularly small)              winegrapes and wine products.                       from regional wine industry associations, Regional
winery enterprises has increased competition           • Improving the skills of industry members.           Development Victoria and Tourism Victoria.
between wineries for the growing wine
tourism market.                                        • Increasing the competitiveness and
                                                                                                             The Victorian Wine Industry Association will
                                                         sustainability of the industry through investing
                                                                                                             adopt a more assertive role in wine industry
In the domestic market, the increasing power             strategically in new production, winery
                                                                                                             education and training courses to ensure delivery
of the large liquor retail chains is creating            tourism infrastructure, marketing and
                                                                                                             of needed skills. The national WineSkills program
discounting cycles and tightening access to the          enterprise management.
                                                                                                             will be reviewed to deliver a focus on enterprise
retail market for small and medium-sized wineries.                                                           management and marketing. For Victorian
                                                       Vintage 2010: Strategic Plan for the Victorian
                                                                                                             wineries, management best practice will be
Exports now account for 60 per cent of Australian      Wine Industry 2006–10 is directed to achieving
                                                                                                             promoted through published case studies that
wine sales with the volume growth in exports           four key outcomes:
                                                                                                             highlight alternative approaches to wine business
coming from the ‘popular premium’ wines                • Grow total sales by 39 per cent from $1.31          structures, use of infrastructure and
produced mainly in the three big inland vineyard         billion to $1.82 billion.                           supply-chain management.
areas of Murray Darling–Swan Hill, Riverina and
                                                       • Grow annual exports by 10 per cent per year
Riverland. However, firming of the Australian                                                                Adoption of best practice production techniques
                                                         from $525 million to $845 million.
currency, increasing competition in export                                                                   and management practices will be encouraged
markets and the pressure to clear accumulating         • Expand cellar-door sales by 6 per cent per year     through initiatives such as a five-year Best
wine inventories into export markets have caused         from $228 million to $305 million – achieving       Production Plan - linked to education and training
a marked decline in the average price per litre          five million winery visits per year.                programs designed to continually improve the
obtained from exports. In this environment there       * Grow domestic retail sales by 5 per cent per        technical skills of industry members.
has also been a fall in export demand for premium        year from $558 million to $712 million.
Australian wines, a trend that is having a serious                                                           The industry will also work towards the
impact on many of Victoria’s small and medium-                                                               development of a Victorian and national vineyard
sized producers, particularly newer entrants into      A new ‘Wines of Victoria’ branding program will       register to provide accurate data on the types and
the industry.                                          lift the profile of Victorian wines, differentiate    locations of winegrape plantings in Victoria and
                                                       Victorian products in the marketplace, and allow      to enable industry-wide communication on vine
The continuing oversupply of winegrapes and the        Victorian wineries to leverage their improved         health and biosecurity issues.
overhang of wine stocks are likely to be continuing    ‘visibility’ to grow their markets and market share
features of the industry for the next few years,       – particularly in the premium, super-premium and
until balance is restored between supply and           ultra-premium range where iconic wines and wine
demand. Increased export competition and the           regions can be used to define the market position
increasing power of the large liquor retail chains     of Victorian wine.
are also likely to persist. In this sharply more
competitive environment the primary challenge
for the Victorian wine industry is to ensure the
ongoing viability of the industry by:

 7                                                                                                                                                                8
                  Victoria’s wine industry

    Victoria has an extensive history of wine            Victoria’s diverse climates and soils were capable
    production. The first commercial vineyard was        of producing world-class sparkling and table
    planted at Yering in the Yarra Valley in 1838. By    wines as well as fortifieds, were keen to develop
    the 1850s there were vineyards and wineries near     a presence in the revitalised and burgeoning
    Geelong, at Great Western and across central and     domestic wine market. Since 1990 the Australian
    north-east Victoria, many of them developed by       wine industry has very successfully developed its
    Swiss and French immigrant vignerons.                export markets, achieving $2.79 billion in annual
                                                         sales by 2005. To meet this unprecedented market
    Victoria’s gold rush of the mid-1850s supported      growth, the Victorian industry has doubled in size
    a flourishing industry that produced sparkling,      over the last decade, as has the wider Australian
    table and fortified wine. By the 1870s Victorian     wine industry.
    wine estates were winning gold medals at the
    great exhibitions of Europe, raising some alarm      Victoria’s wineries (320 in 1999 and 583 by 2005)
    in the European wine world. Dubbed ‘John Bull’s      are spread across 22 wine regions. With the
    Vineyard’ by the British colonial authorities,       highest number of wineries and wine regions
    Victoria was expected to rapidly surpass France      of any Australian State, Victoria produces an
    as a supplier of fine wines to the British Empire.   extraordinary diversity of wine styles and
                                                         varieties. Victoria represents 28 per cent of the
    But within two decades the Victorian wine            nation’s vineyard plantings and 24 per cent of its
    industry was almost destroyed. The destructive       winegrape/wine production.
    vine louse phylloxera, introduced into the Geelong
    district in 1877, rapidly spread through central     The modern Victorian wine industry is an
    and north-east Victoria. That was followed           industry of two parts. The large tracts of vineyard
    by a shift in consumer preferences from fine         and the large-scale wineries in the Murray–
    table wines to fortifieds. The final blow was the    Darling and Swan Hill regions of north-west
    Depression of the 1890s, which brought about         Victoria are the ‘engine room’ of Victorian wine
    a collapse in local and export markets for           production, representing 80 per cent of the State’s
    Victorian wines. Many vineyards were removed         production. This zone, one of the top three centres
    and never replanted.                                 of national wine production, produces popular
                                                         premium varietal table wines and bulk wine for
    In the subsequent 60 years Victoria lost its         the consumer cask market, and supplies the rapid
    dominance of Australian wine production to           growth in export demand for value-for-money
    South Australia. By the end of the 1950s only        Australian wines.
    the remnants of Victoria’s once extensive wine
    industry remained – a handful of wineries            The remaining 20 per cent of Victorian wine
    across the north-east, the Murray Valley in the      production is located from western Victoria to
    north-west, Great Western and the Goulburn           Gippsland in the east, and from the Mornington
    Valley. By 1966 only 16 Victorian wineries were      Peninsula in the south to Rutherglen and the
    still operating.                                     Alpine Valleys of the north-east. This sector of
                                                         Victoria’s wine industry, comprising more than
    A remarkable renaissance has occurred over the       500 wine enterprises, is dominated by small
    past 40 years. In the late 1960s a few visionaries   winemakers who generally produce fewer than
    planted new vineyards in the old vine districts      5000 dozen bottles of wine a year. These small
    of central and southern Victoria. In the 1970s       producers, who typically focus their efforts on
    the advent of the four-litre wine ‘cask’ created a   high-value super-premium and ultra-premium
    new market for the grapes of the Murray Valley       wines, compete for a share of the top 5 per cent of
    districts in north-west Victoria. By the 1980s       the domestic wine market.
    many new Victorian vignerons, discovering that
9                                                                                                         10
                                                                                                                           Industry outlook

                                                                                                              A bumper national crop of 1.92 million tonnes
                                                                                                              of winegrapes in 2005, following a similar
                                                                                                              crush in 2004, has left Australian winemakers
                                                                                                              overstocked. This oversupply, coupled with slower
                                                                                                              export growth, continues into vintage 2006.
                                                                                                              Australian winemakers are holding excess stocks
                                                                                                              amounting to almost six months of current sales
                                                                                                              – some 500–600 million litres of wine, or the
                       Recent industry performance                                                            equivalent of 700,000–800,000 tonnes of grapes.

                                                                                                              Market growth is driven by exports, which grew
                                              Target for 2003 ¹    March 2002 (est.) ²   June 2005 (est.) ²   at almost 15 per cent in 2005, mostly in the
     Total value of sales                     $1 billion           $923 million          $1.311 billion       popular premium sector. The overproduction of
     Exports sales                            $300 million         $229 million          $525 million         grapes from cool-climate regions following big
     Cellar-door sales                        $120 million         $168 million          $228 million         production years in 2004 and 2005 has not eased,
     Winery visitors                          3.5 million visits   3 million visits      3.3 million visits   and will continue to suppress grape prices in the
     Domestic market sales                    $580 million         $526 million          $558 million         medium term.

     Industry investment                      $650 million         $680 million          $730 million
                                                                                                              With more and more grape production destined to
     Additional employment                    3000 jobs            2536 jobs             3913 jobs
                                                                                                              meet demand for generic brands, any shortages
     1 Extract from ‘Vintage 2003, The Industry Vision’                                                       of grapes in a particular region may be readily
     2 Estimated from Government and Industry Sources
                                                                                                              sourced from other regions. It is important
                                                                                                              therefore that any consideration of expected
                                                                                                              intake and winemaker preferences is made
                                                                                                              in the context of the national position. The
                                                                                                              substitutability between regions means that
                                                                                                              competitive forces in the grape market will
                                                                                                              transcend State boundaries.

                                                                                                              Winemaker sentiment, as measured by the Pricing
                                                                                                              and Utilisation surveys, is positive. Given little
                                                                                                              growth in expected production of red grapes
                                                                                                              over the next three years and steady growth
                                                                                                              in winemakers demand, red grape supply and
                                                                                                              demand appears to be heading into balance in the
                                                                                                              medium term. Only marginal increases in bearing
                                                                                                              area are expected for white grapes (mostly
                                                                                                              Chardonnay for the inland regions). This should
                                                                                                              keep national grape production within the band of
                                                                                                              1.9 to 2 million tonnes.

                                                                                                              [Reference: Greater Victoria Wine Grape
                                                                                                              Outlook Summary 2006 – 2010, produced by
                                                                                                              McGrath-Kerr Business Consultants on behalf of
                                                                                                              the VWIA, utilising residual trust funds from the
                                                                                                              Greater Victoria Wine Grape Industry
                                                                                                              Development Committee].
11                                                                                                                                                                 12
              Key issues – the voice of industry                                                                                Growth drivers and challenges

Industry-wide consultations during 2005 revealed that industry members viewed the following issues as most        Exports                                                  Shift in demand to lower-cost winegrapes
critical to their present and future survival.
                                                                                                                  The rapid expansion of national and Victorian            A more competitive export market and the
                                                                                                                  vineyard plantings since the mid-1990s has been          growth in the popular premium category in both
      The overhang of cool-climate grapes is lowering returns for winegrape and wine producers.                   largely driven by the unprecedented growth in            export and domestic wine markets is causing a
                                                                                                                  Australian wine exports, which have increased            significant shift to winegrape purchases from the
                                                                                                                  from some A$100 million in 1990 to A$2.79 billion        three major inland production zones. Winemakers
      The expanded number of new (particularly small) winery enterprises has increased competition
                                                                                                                  in 2005. Exports now account for 60 per cent of          are now actively seeking lower-priced winegrapes
      between wineries for the growing wine tourism market.
                                                                                                                  Australian wine sales.                                   to better meet the lower price points for wine
                                                                                                                                                                           currently being dictated by the market.
      Victoria’s overall market share is declining.                                                               Initially in the United Kingdom and more recently        This trend runs counter to the trend to lower-
                                                                                                                  in the United States, Canada, Continental Europe,        volume, higher-value wines predicted in ’Strategy
                                                                                                                  Scandinavia and Asia, Australian wines have              2025’, the 30-year plan (1996–2025) for Australia’s
      Large volumes of inexpensive South Australian wine are increasing competition.
                                                                                                                  forged a significant presence. By 2005 Australia         wine industry.
                                                                                                                  was the leading source of wine imports in the
      The trend to treat wine as a commodity resulting in difficulties in encouraging consumers to ‘trade up’.    United Kingdom, ahead of France, and the second          While that longer-term trend may still be realised,
                                                                                                                  highest in the United States, only slightly behind       in the short to medium term an oversupply of
                                                                                                                  Italy. Overwhelmingly the volume growth in               winegrapes and large wine inventories will
      Continuing consolidation of retail outlets for wine is tightening winemakers’ access to the domestic        exports has been in the ‘popular premium’ wines          continue to suppress prices for winegrapes and
      retail market.                                                                                              that are priced below the equivalent of A$10             wine, and wine companies will continue to source
                                                                                                                  per bottle – wines that are mainly produced in           lower-cost fruit.
      The variability and inconsistency in the quality of Victorian wine.                                         the three big inland vineyard areas of Murray
                                                                                                                  Darling–Swan Hill, Riverina and Riverland.               The shift away from cool-climate regions as
                                                                                                                                                                           a primary source of grape supply for the large
      Reference by some United Kingdom wine writers to `industrial’ Australian wines is undermining the           However, firming of the Australian currency,             wine companies has been accompanied by a leap
      perceptions of consumers in that important export market.                                                   increasing competition in export markets and the         in the quality of winegrapes being grown in
                                                                                                                  pressure to clear accumulating wine inventories          the major inland regions where improved
                                                                                                                  have caused a marked decline in the average              production techniques, a higher proportion of
      Many in the industry are yet to develop the necessary technical skills (in viticulture and winemaking).
                                                                                                                  price per litre obtained from exports. In this           premium varietals, reduced cropping levels and
                                                                                                                  environment there is a fall in export demand for         a string of excellent vintages have combined to
      A need for a better understanding of financial planning, cost management, business skills and               super and ultra premium Australian wines. The            deliver lower-priced and higher-quality fruit to
      marketing to assist wineries to generate higher margins.                                                    serious impact of this trend on many smaller and         the large wineries.
                                                                                                                  medium-sized producers has been recognised by
                                                                                                                  Wine Australia (formerly Australian Wine Export          Challenge: To promote the consumption of 
      A need for a brand identity for Victorian wine.
                                                                                                                  Council) with its launch of a new ‘Wine Australia’       Victoria’s premium, super-premium and  
                                                                                                                  brand for promoting premium wines to Australia’s         ultra-premium wines in all markets – against  
      No industry-wide database that can be used for monitoring and forecasting supply and demand for             export markets. This new branding and marketing          a prevailing consumer trend towards  
      winegrapes and wine.                                                                                        is particularly valuable for Victoria, given the large   lower-priced wines.
                                                                                                                  number of smaller producers of premium,
                                                                                                                  super-premium and ultra-premium wines.
      The difficulty of gaining an export market for small producers, given the growing competition from
      the other ‘new world’ and traditional producers, and the difficulties of effectively promoting Victoria’s   Challenge: To accelerate the growth of  
      diverse wine styles in export markets.                                                                      Victorian wine exports by utilising the  
                                                                                                                  ‘Wine Australia’ branding and participating 
                                                                                                                  in associated promotions.

13                                                                                                                                                                                                                          14
Overhang of cool-climate red winegrapes              Red or white wine?                                  Domestic market discounting                          Consolidation of liquor retailing

The shift towards purchasing winegrapes              The international love affair with red wines        The current oversupply of red wine and the           The sharply more competitive domestic retail wine
from the three major inland regions has added        identified in Vintage 2003 continues – leading to   emergence of large numbers of new wine               market is also a result of retail consolidation.
to the oversupply problem caused by the recent       a significantly higher level of new red plantings   companies and wine labels has encouraged             In 2005 the two key wine retailers – entities owned
planting of premium red varieties such as Cabernet   in all regions. Other than some oversupply of       discounting of wine in the domestic market,          by either Coles or Woolworths – controlled in
Sauvignon, Merlot and Shiraz in Victoria’s cool      Chardonnay in the Murray Valley region, the         a trend that is spreading to export markets.         excess of 50 per cent of the Australian retail liquor
climate regions and to a lesser extent Pinot Noir.   overhang of winegrapes is almost exclusively in     The oversupply of red wine in the domestic market,   market. This consolidation and concentration of
                                                     red grapes. While an end to the current consumer    has already led to markedly higher volumes of        market power will continue, through extension of
At the time of the 2005 vintage the cool climate     red wine boom is nowhere in sight, domestic         ‘cleanskin’ or unlabelled wines, a trend that is     liquor sales into selected Coles supermarkets, the
zones accounted for 40 per cent of Australian        market growth trends in Rose and lighter white      strongest in Victoria where AC Neilson estimates     roll out of the two principal liquor superstores –
winegrape plantings but only 20 per cent of          styles are emerging. Should this trend deepen,      50 per cent of all cleanskin wines are being sold    Dan Murphy’s (Woolworths) and 1st Choice (Coles)
Australian wine sales. While Victoria’s level of     the importance of maintaining strong growth in      (as at November 2005).                               – and continued acquisition of independent liquor
exposure to this is less than South Australia’s,     exports would become even greater and, in the                                                            retailers. Supermarket stocking policies, highly
Victoria cannot be insulated from interstate         medium term, there may be a need to accelerate      This discounting cycle, along with the supply        aggressive pricing and centralised purchasing,
trade in grapes and wine, especially given the       new plantings of specific white varieties.          of large volumes of inexpensive wine through         when linked to the extensive product range and
dominance of the top four wine companies in                                                              retail outlets, is inhibiting the extent to which    market power of the large wine companies, is
terms of production and share of wine sales.         Challenge: To identify significant shifts in        winemakers can clear stocks of premium wine at       excluding smaller wineries from obtaining space
                                                     consumer demand in sufficient time to change        full margins and applying pressure on producers      within the retail liquor sector.
Challenge: To grow the markets for Victorian         the mix of winegrape and wine production and        to discount in order to gain market outlets. This
super-premium and ultra-premium wines,               to adapt wine styles to meet emerging               market environment also diminishes cellar-door       Challenge: To grow alternative avenues to market 
especially given the medium-term oversupply          market demands.                                     sales, with anecdotal evidence suggesting that       for smaller Victorian producers, such as cellar-
of cool-climate red winegrapes. Strategically,                                                           consumers are choosing to purchase discounted        door and other direct market channels, specialist 
this is the industry’s primary challenge over                                                            wine through retail outlets rather than ordering     independent wine retailers, the restaurant sector 
the next five years.                                                                                     direct from the winery. Only a rebalancing of        and niche export markets.
                                                                                                         supply and demand will break this cycle in
                                                                                                         liquor retailing.

                                                                                                         Challenge: To promote the attributes of Victorian 
                                                                                                         premium, super-premium and ultra-premium 
                                                                                                         wines, including the experience of tasting and 
                                                                                                         purchasing these wines at the winery, at wine 
                                                                                                         retail specialists and at restaurants.

15                                                                                                                                                                                                             16
             Strategic plan 2006–2010

Key outcomes

Between 2006 and 2010, through implementation of this Plan the Victorian wine
industry will achieve the following goals:

    Grow total sales value by 39 per cent from $1.31 billion to $1.82 billion.
    Grow annual exports by 10 per cent per year from $525 million
    to $845 million.
    Expand annual cellar-door sales by 6 per cent per year from $228 million to
    $305 million – achieving five million winery visits per year.
    Grow domestic market retail sales by 5 per cent per year from $558 million
    to $712 million.

                                                           For that purpose, a task force will be formed         ensure that a flow of information on the ‘Wines
     Objectives                                            under the leadership of the Victorian Wine            of Victoria’ brand, including information on
                                                           Industry Association and with representation          wine regions and wine styles, will continually
     The Victorian wine industry will pursue its key       from all the organisations concerned with
                                                           Victoria’s wine branding – regional wine industry
                                                                                                                 reinforce the ‘Wines of Victoria’ positioning. The
                                                                                                                 communications program will be reinforced by
     outcomes through the following objectives, each
                                                           associations, Regional Development Victoria           a series of trade tastings and education events
     of which has accompanying planned actions for
                                                           and Tourism Victoria. The task force will first       throughout the year.
     achieving the goals for the five-year
                                                           develop a brief to guide the development of the
     period 2006-2010.
                                                           ‘Wines of Victoria’ proposition (greatest diversity   Victorians will become familiar with the ‘Wines
                                                           of premium wine styles), positioning (leading the     of Victoria’ branding when they take part in
         Objective 1                                       New World in premium wine styles) and branding        regular events such as the Exhibition of Victorian
                                                           tools such as a logo and slogan.                      Winemakers, the Federation Square Regional
                                                                                                                 Showcase series, the Melbourne Food and Wine
     Grow domestic and export markets through 
                                                           2. Develop and implement ‘Wines of Victoria’          Festival, and through use of the branding in
     promoting a strong ‘Wines of Victoria’ brand 
                                                              promotional programs that cover:                   Tourism Victoria’s Wine Regions of Victoria
     identity (within the ‘Wine Australia’ brand) that 
                                                                                                                 booklet and its website at
     recognises Victoria’s regional diversity.             • Victorian wine retail and restaurant sectors.
                                                           • Victorian wine-trade education, for example         The branding program will subsequently be
                                                             trade communications and trade events.              extended to all Victoria’s export market activities,
                                                           • Victorian wine consumers through, for               such as the annual program of wine trade
     1. Form a ‘Wines of Victoria’ task force to
                                                             example, events and exhibitions.                    missions and export market events conducted
        establish brand proposition, brand positioning
                                                                                                                 by Regional Development Victoria, new export
        and branding tools.                                • development of Victorian wine exports through,
                                                                                                                 market activities, and inbound trade missions.
                                                             for example, Victorian export facilitation
     Most Victorian wine producers rely on the               programs, events and inbound promotions.
                                                                                                                 3.  Implement an industry-wide communications
     domestic wine market, which they access through
                                                                                                                     program to promote adoption of the
     cellar-door and other direct sales, sales to          Regional Development Victoria and the Victorian
                                                                                                                     ‘Wines of Victoria’ brand.
     restaurants and sales to the retail liquor sector.    Wine Industry Association have already drafted
     Melbourne is the most important market whether        a strategy to assist Victorian wine producers
                                                                                                                 The success of the ‘Wines of Victoria’ branding
     for wholesaling to licensed liquor outlets or for     to obtain greater access to the domestic retail
                                                                                                                 will rely on its widespread acceptance and
     attracting winery tourists.                           market through negotiating improved access for
                                                                                                                 adoption by Victorian wine producers. The
                                                           Victorian wines to the major liquor chains within
                                                                                                                 Victorian Wine Industry Association and the
     Market research into boutique-scale wineries          Victoria, and increasing wine trade awareness
                                                                                                                 regional wine industry associations, as industry
     shows that the Barossa Valley is well ahead of        of the range and attributes of Victorian wines.
                                                                                                                 custodians of the brand, need to conduct an
     any other region in being acclaimed as Australia’s    The new ‘Wines of Victoria’ promotional program
                                                                                                                 industry communications program to engage
     leading wine region. However, the profile of          can incorporate and extend this retail access
                                                                                                                 industry participants, explain the branding
     Victorian wine regions is being increasingly          strategy, particularly through improving product
                                                                                                                 program and recruit producers into using the
     noted, particularly among younger demographics.       representation for Victorian wines on the wine
                                                                                                                 brand in all their marketing activities. The longer-
     To develop Victoria’s reputation as the leading       lists of Melbourne restaurants and cafés. Apart
                                                                                                                 term success of the ‘Wines of Victoria’ branding
     State for premium-quality, diverse wine styles, the   from the cellar door, restaurants and cafés are the
                                                                                                                 will rely on widespread adoption of the branding
     Victorian industry needs strong ‘Wines of Victoria’   primary market for many Victorian producers.
                                                                                                                 in all wine and winery tourism marketing and
     branding that highlights Victoria’s market
                                                                                                                 continual reinforcement of its use across
     leadership in premium wines and in winery             A program of regular communications with
                                                                                                                 the industry.
     tourism destinations.                                 the Victorian and interstate wine trade will

19                                                                                                                                                                20
    Objective 2

Grow the Victorian winery tourism market by         5. Continue to track the economic performance
becoming Australia’s leading destination for           of the Victorian wine industry and engage
wine tourists.                                         Government in supporting the continuation of
                                                       tax rebates, as necessary.

1. Review and implement programs and projected
   outcomes of Victoria’s Food and Wine Tourism
   Plan 2004–2007 and supplement its strategies
   where necessary or appropriate.

2. Integrate the Wines of Victoria brand
   into promotional programs including
   those of Tourism Victoria and other
   government agencies.

3. Implement a workshop program that covers
   cellar-door management and marketing.

The improvement of service standards, distinctive
visitor experiences, and cellar-door marketing
skills have been identified as crucial for
increasing winery tourism visitation and sales
yields at cellar doors. Regional Development
Victoria and regional wine industry associations
will conduct a series of workshops to improve
members’ skills in cellar-door management
and marketing. The existing WineSkills course
modules may be adapted for these workshops,
or new programs may be developed.

4. Develop an action plan with the industry,
   government, and potential investment partners
   to encourage investment growth in winery
   tourism within regional Victoria.

Promote to regional associations and the whole
of industry the availability of advice through
Tourism Victoria’s Investment Guidelines for
Wine Tourism, and highlight hero examples of
such investment, with particular emphasis on
distinctive cellar door experiences.

                                                      protocol is signed by the provider. The Association
     Objective 3                                      will also encourage providers to deliver short
                                                      courses and online modules that will encourage
                                                      existing industry participants to undertake
Strengthen industry skills in viticulture,            education and training programs.
winemaking, wine marketing and sales, wine
tourism and business management.                      3. Work with Regional Development Victoria to
                                                         review, adapt, deliver and evaluate WineSkills
Actions                                                  course modules in business management
                                                         and marketing.
1. Facilitate the formation of a steering committee
   with training providers to audit industry          Enterprise management and product marketing
   training and education courses, conduct            have been identified by industry participants
   gap analysis, and foster the development           as priorities for education, training and skills
   of new programs and online delivery                development within the industry. The WineSkills
   of training.                                       programs developed by the Winemakers’
                                                      Federation of Australia to provide small and
2. Use the above committee to foster agreements       medium-size winemakers with specialist expertise
   with providers of education and training           include modules in enterprise management and
   courses to ensure industry review and              marketing that could be readily adapted for
   accreditation of courses, course delivery and      regular delivery on a regional basis.
   planned learning outcomes.
                                                      4. Review supply-chain structures within
Many courses, particularly in the vocational             the industry (and other sectors) with a view to
education and training sector, have been developed       identifying opportunities for network or cluster
with very limited input from the industry.               arrangements to achieve greater efficiencies.
The absence of formal industry involvement in
the development of curricula, training modules        The dispersed regional locations of the Victorian
and assessment of learning outcomes has led to        wine industry and the predominance of small
fragmentation and duplication of course delivery      production units inhibit the development of
and the delivery of training that is sometimes of a   integrated and efficient supply chains. A formal
questionable standard. There is a need to establish   review of alternative supply-chain structures,
an agreed protocol between the Victorian Wine         and promotion of its results, would stimulate the
Industry Association and education and training       development of improved operational structures
providers to ensure the following arrangements:       that would deliver cost savings to producers.
• Industry accreditation of higher education          Examples could be:
  courses and training programs and regular           • shared use of vineyard equipment.
  industry review of content, training resources
                                                      • shared use of winery infrastructure and
  and quality of learning outcomes
                                                        wine storage.
  for participants.
                                                      • regional agreements on standardised
• Industry review of any new training or higher
                                                        components such as bottles and closures.
  education courses to assess the extent to which
  it meets industry needs and has the resources       • group purchasing of winemaking components,
  needed to deliver the high-quality learning           dry goods and services.
  outcomes required by the industry.                  • group arrangements for packaging,
                                                        warehousing and freight consolidation.
The Victorian Wine Industry Association would
endorse only those programs or courses that meet      • group arrangements for cellar-door operations.
the requirements of the protocol and for which the    • group arrangements for wholesale wine sales
                                                        and distribution.

23                                                                                                          24
         Objective 4

     Improve efficiency in producing consistently           would deliver an estimated $2.5 million. This      In the absence of a Register of Victorian vineyards
     high-quality wine grapes and wines by                  arrangement would mirror a similar agreement       and wineries, there can be no industry-wide
     achieving world’s best practice in production and      negotiated in principle between the Grape and      communication on any issue, including vine
     environmental management.                              Wine Research and Development Corporation          health and bio-security issues. Nor can there be
                                                            and the New South Wales Wine Industry              any accurate record of plantings. Although the
     Actions                                                Association, Agriculture New South Wales,          establishment of a Register of Victorian vineyards
                                                            and Charles Sturt University, through the          and wineries was a stated objective within the
     1. Develop a five-year plan for ‘Best Production       Wagga-based National Grape and Wine                Vintage 2003 Strategic Plan, and is an item of the
        Practice’ based on the industry’s experience        Industry Centre.                                   Victorian Wine Industry Association’s policy, its
        of programs and research conducted by the                                                              realisation is yet to occur.
                                                          • Establish a doctoral program and other
        Victorian Department of Primary Industry,
                                                            research projects with Victorian universities,
        the education and training sector, the Grape
                                                            through which the universities engage in
        and Wine Research and Development
                                                            industry-nominated research.
        Corporation and the Regional Innovation and
        Technology Adoption Program.                      • Invite Victoria’s top 50 wine producers and
                                                            regional industry associations to voluntarily
     There is an urgent need to plan for increased          contribute funding to either the overall
     integration of industry-funded research and            Program or to specific projects such as
     development at State and regional levels, the          sponsoring university research.
     viticulture research and extension services of the   • Use funding from the Grape and Wine
     Department of Primary Industry and university-         Research and Development Corporation to
     based research. Unless such action is taken, the       contribute matching industry funds to support
     current resources available to the Victorian wine      the Victorian Government’s maintenance and
     industry will be shifted to other industries and       extension of the Grapecheque programs.
     may be lost to the industry forever. Such a loss
                                                          • Continue grape utilisation surveys for
     would endanger the achievement of the Vintage
                                                            Victorian regions as part of the national
     2010 objective of continuous improvement in
                                                            survey program.
     the quality of vineyard and winery production
     towards achieving ‘world’s best practice’            • Encourage regional wine industry
     production technologies and management.                associations to set benchmarks for quality
                                                            and economic performance.
     The ‘Best Production Practice Plan’, to be
                                                          • Encourage participation in national
     implemented through a memorandum of
                                                            environmental management systems (e.g. the
     understanding between partner organisations,
                                                            National EMS template and the Australian
     will be developed along the following lines.
                                                            Wine Industry Stewardship Program) by
                                                            wineries and vineyards.
     • Make arrangements to fund the Plan through
       an agreement with the Grape and Wine
                                                          2. Establish a Register of Victorian vineyards and
       Research and Development Corporation that
                                                             wineries to form part of a national Register.
       returns 10 per cent of the Corporation’s grape
       and wine industry levies and matching
       Commonwealth funding to Victoria, which

25                                                                                                                                                            26
     Objective 5                                                                                                Objective 6

Ensure the sustainability of Victoria’s wine            The marketability of Victorian winegrapes,          Facilitate sustainable wine industry investment
industry through continual improvement in the           a crucial determinant of industry sustainability,   in Victoria.
quality of production and the efficient utilisation     will increasingly rely on extending
of production infrastructure.                           phylloxera-free status across all wine-producing    Actions
                                                        regions of the State. Work is already underway
Actions                                                 to extend the Phylloxera Exclusion Zone, already    1. Attract appropriate investment
                                                        established in Henty, into the Grampians/Pyrenees      through industry and Government
1. Communicate through regional associations            (surveying commenced December 2005)                    facilitation programs.
   the benefits of “world’s best practice” vineyard     and Bendigo/Heathcote
   management and winemaking.                           (commencing December 2006) areas.                   2. Facilitate the development of an Action Plan to
                                                                                                               guide investment in the wine sector over the
The sustainability of Victorian vineyards and           4. Develop an Action Plan with regional                next five years.
wineries as businesses relies on a continuing              associations to implement a review of the
demand for their wines, which in turn depends              current Rural Use Zone planning                  3. Promote this plan to the industry and engage
on continual improvement in the quality of                 regulations and ensure vineyards are                their support for its implementation.
production and the achievement of the lowest               protected from further urban encroachment,
possible costs of production. The five-year Best           and promote to Government.                       Beyond 2007–08, when there should be an easing
Production Practice program, discussed in the                                                               of the current oversupply of cool-climate red
previous section, will guide and promote the            While Rural Land Use overlays are now               winegrapes and wine, it is likely that planting
adoption of ‘world’s best practice’ technologies and    established in State and shire planning schemes,    will recommence to meet future requirements.
management within the industry.                         the Victorian Wine Industry Association must        While the excessive planting of the 1998–2000
                                                        continue its dialogue with the State Government     period is to be avoided, an expected improvement
2. Develop an Action Plan with regional                 and local governments to ensure urban               in the economic outlook for growers and wine
   associations, Plant Health Australia, and DPI        encroachment on vineyard and winery operations      producers over the medium term will encourage
   to implement biosecurity protocols for all           is minimised.                                       new investment in production and infrastructure.
   Victorian wine regions.                                                                                  New investment in winery tourism infrastructure,
                                                                                                            in particular, will be required if Victoria is to meet
Sustainable production depends on protecting the                                                            its strategic targets for growth in cellar-door
industry from phylloxera and other exotic pests                                                             trade and visitor numbers.
and diseases. While funds from the Grape and
Wine Research and Development Corporation,
an Australian Government statutory authority,
have been used to conduct regional workshops on
biosecurity protocols, a number of Victoria’s wine
regions are yet to implement these protocols.

3. Develop an Action Plan with regional
   associations,Victorian and national agencies
   to extend the phylloxera-free status of Victoria’s
   wine regions.

27                                                                                                                                                                   28
    Vintage 2010: Strategic Plan for the Victorian     Neil Robb
    Wine Industry 2006 – 2010 has been developed       Chairman, Victorian Wine Industry Association
    by a Steering Committee formed under the           Promotions and Export Committee President,
    auspices of the Victorian Wine Industry            Pyrenees Vignerons Association Principal,
    Association, with support funding provided by      Redbank Winery, Pyrenees
    the Victorian Government through Regional
    Development Victoria. The Vintage 2010 Steering    Martin Spedding
    Committee comprised:                               President, Mornington Peninsula Vignerons
                                                       Association Principal, Ten Minutes By Tractor
    Chris Pfeiffer                                     Wine Co, Mornington Peninsula
    Chair, Steering Committee
    Chairman, Winemakers of Rutherglen                 Stephen Shelmerdine
    Principal, Pfeiffer Wines, Rutherglen              Treasurer, Victorian Wine Industry Association
                                                       Principal, Shelmerdine Vineyards, Yarra Valley
    Astrid Adamson                                     and Heathcote
    Manager, Food and Wine Tourism,
    Tourism Victoria                                   The ‘Industry Outlook’ text uses the findings of
                                                       ‘Greater Victoria Wine Grape Outlook: Summary
    John Ellis                                         2006–2010’, produced by McGrath-Kerr Business
    Chairman, Victorian Food and Wine Tourism          Consultants for the Victorian Wine Industry
    Council Principal, The Hanging Rock Winery,        Association, a project assisted by residual trust
    Macedon Ranges                                     funds from the Greater Victoria Wine Grape
                                                       Industry Development Committee.
    Michael Matthews
    Chairman, Victorian Wine Industry Association      The Committee thanks Dr Peter Box of Group
    President, Yarra Valley Wine Growers Association   Strategies for his industry workshop facilitation,
    Wine industry consultant                           Stuart McGrath-Kerr of McGrath-Kerr Business
                                                       Consultants for industry supply-demand analysis,
    Mark McKenzie                                      and Graeme Chipp and Dale Renner and their
    Chief Executive former, Victorian Wine             team from Growth Solutions Group for their
    Industry Association                               development of the ‘Wines of Victoria’ branding.

    Chris Pike                                         The Committee acknowledges the assistance
    General Manager, Administration and Finance,       of Ross Brown and Michelle Jordan, and the
    Wingara Wine Group, Murray Darling                 contribution of many members of the Victorian
    and Coonawarra                                     wine industry, wine trade and wine media
                                                       who contributed to the development of this
    Yasmin Power                                       strategic plan.
    Manager, Beverages, Regional
    Development Victoria                               The contribution of Mark Mckenzie in writing
                                                       this Strategic document is also acknowledged.

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