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This article originally appeared in the September 2017 edition of Grapegrower & Winemaker.

 

It’s been a long time coming, but wine industry suppliers are beginning to see fresh shoots of growth for their businesses. They hope it’s a sign of renewed life for the sector as a whole. Hans Mick reports.


Many operators within the supply chain of Australia’s wine industry agree that demand has been pretty slow. Some say it’s the last few years that have been the toughest, while others believe the hard times stretch back one or even two decades. That’s a long series of seasons to wait for things to turn around.

But as official figures released in August show the third consecutive annual rise in crush and average purchase price of winegrapes, a sustained industry rebound may be more than wishful thinking. Key suppliers say there’s a mood of ‘cautious optimism’.

“We are seeing a lift,” said Simon Harris, business development manager at family-owned company Paper-Pak, which manufactures wine and bottle bags, wine carry packs, shipping cartons and other retail packaging.

“We’re definitely getting a better result, a lift in volumes within the markets in South Australia and in Victoria as well.”

 

“We’re definitely getting a better result, a lift in volumes within the markets in South Australia and in Victoria as well.”

Harris said the company started to notice an increase in demand for its products at the start of the 2017 calendar year.

“There’s more interest in our carton line and we’re picking up sales for our SOS [self-opening sack] retail bags,” he said. “Custom bags with a print design – there’s an increase in that.”

And while Harris said a more competitive environment could be another factor contributing to the sales uptick, he said stronger demand has been the likely game changer.

“We love to see improvement. It keeps everyone in a healthy state of business,” said Harris.

Left to right: Viticulturist Michael Schofield and owners Kym and John Davey amid 20ha of newly planted Ocloc posts at Shingleback winery and vineyards at McLaren Vale

Eye on the future

“The industry again has a skip in its step. This skip will result in new planting that will need our new trellises,” said Nigel Catt, co-founder of Ocvitti Australia.

The company based on South Australia’s Fleurieu Peninsula has designed and developed an innovative high tensile steel trellis post which can be used as a non-toxic, environmentally-sustainable alternative to the treated pine structures widely used in vineyards.

Catt said ‘organic’ demand for the so-called Ocloc post had resulted in sales surging. He said sales for 2017 are expected to reach 100,000 units, double the 50,000 sold in 2016 and up significantly from the 14,000 produced and supplied to vignerons in 2015.

“People really need to upgrade. Over the past 15 to 20 years because of where the industry’s been, it has been quiet,”

 

The company expects this upward trend to continue with renewed prosperity giving grapegrowers a chance to make much-needed, long-term improvements to vineyard infrastructure.

“There are ramifications,” Catt said. “People really need to upgrade. Over the past 15 to 20 years because of where the industry’s been, it has been quiet,” he said. “There haven’t been a lot of trellises replaced. The older ones have dried out and are starting to fail.”

Catt said with exports and grape prices higher, growers will once again have an eye on the future.

“Instead of just marking time, they will be looking at making preparations for the next 25 years. And that’s where we come in,” he said.

The other half of Ocvitti’s co-founding partnership, Brian O’Malley, said there are now plans to expand manufacturing operations across the Tasman to take advantage of opportunities in New Zealand.

Demand ‘ramping up’

Last month’s release of the National Vintage Report 2017 showed the Australian crush estimated to be 1.93 million tonnes. That marks a five per cent jump from the 2016 vintage. The report also revealed positive numbers for the average purchase price – up to $565 per tonne, a seven per cent annual increase and the highest price in almost a decade.

Another major industry supplier has seen this overall trend translated as a ‘ramping up’ of demand for its products.

“The last quarter has gone well for us,” said Brenton Roberts, Orora Glass national sales manager.

The multinational packaging business operates a state-of-the-art manufacturing facility at Gawler in South Australia and supplies bottles to a range of Australian winemakers as well as to makers of other beverages such as beer, cider and soft drinks.

Roberts said the renewed sales growth for wine has come in contrast to business trends over the preceding decade. “Over the last 10 years markets have flat-lined,” he said.

Roberts said the stronger Chinese demand is having an impact more broadly across the industry.

 

“These have been challenging times for the industry, but even through the difficult times, people remained positive and upbeat. It’s always nice when it is moving in the right direction and it’s great to see our customers doing well,” Roberts said. “It’s a good reward for the efforts of those making wine.”

The glassmaker’s increasing sales volume has been predominantly for its line of cork mouth wine bottles. This has been attributed to a single factor: strengthening demand for Australian wine from Chinese consumers who tend to favour this type of wine bottle.

Roberts said the stronger Chinese demand is having an impact more broadly across the industry. “It’s those winemakers with strong distribution fronts into the booming Chinese market that have benefitted most,” he said.

His sentiments reflect the findings of another recent report showing Australian wine export value rose by $201 million, or 10% during the 2016-17 financial year to $2.31 billion. The Wine Australia Export Report released in June showed while there’s also been rising demand from the United States, it has been Greater China (mainland China, Hong Kong and Macau) that’s become the epicentre of Australia’s wine export revival.  Exports to this combined market rose by 33 per cent in the latest financial year to $721 million.

Word of caution

But a ‘gentle word of caution’ has been given when it comes to the industry’s glowing expectations of Chinese demand.

“We should definitely be looking at the industry glass as being half-full,” said Matthew Moate, Wine Industry Suppliers Australia executive officer.

“Opportunities are there for brave and bold ventures who want to put in the investment. But we need to be pragmatic when it comes to China, we definitely don’t want to put all our eggs in one basket,” he said. Moate referred to the ‘boom and bust’ cycles which have had an impact on the export-focused Australian mining sector. Once-strong Iron ore prices have tumbled this year due to oversupply and tougher competition from international and domestic Chinese suppliers of the commodity.

But despite his cautionary tone, Moate said he does expect Australian wine exports to China to continue their climb higher. “It’ll probably get to $1 billion dollars [per year] without too much trouble. The challenge will be sustaining that,” said Moate.

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