Annual Report

Transcription

1 Annual Report

2 Published by: Wine Australia Corporation National Wine Centre Industry House Corner Hackney and Botanic Roads, Adelaide SA 5000 Postal Address: PO Box 2733, Kent Town, SA 5071 Telephone: Facsimile: [email protected] Website: Wine Australia Corporation 2013 ISSN This work is copyright. Textual information in this report may be reproduced in whole or in part, provided the information is not sold or used for commercial benefit and its source ( Wine Australia Annual Report ) is acknowledged. Reproduction of text for other purposes, and storage or reproduction of any photographs or other graphical material in the report for any purpose is prohibited without the prior written permission of Wine Australia Corporation.

3 Contents OVERVIEW 4 Our mission 4 What we do 4 Stakeholders and other industry partners 4 CHAIRMAN S REPORT 5 CHIEF EXECUTIVE S REPORT 8 YEAR IN REVIEW 12 State of the industry 13 Market development 17 Wine sector intelligence 23 Compliance 26 Trade 28 Geographical indications 30 Financial results 30 Market overviews 31 The ORGANISATION 45 Board 46 Committees 48 Enabling legislation 50 Accountability 50 Corporate governanace 51 People 53 FINANCIAL STATEMENTS 55 APPENDICIES 94 Appendix 1 Corporate directory 95 Appendix 2 Wine industry statistics 96 Appendix 3 Glossary of terms and acronyms 98 Appendix 4 Compliance index 99 Appendix 5 Alphabetical index 100

4 Overview The Wine Australia Corporation is a statutory authority that was established in 1981 to provide strategic support to the Australian wine sector. Its responsibilities include: International and domestic marketing of Australian wine; Export regulation and compliance; Wine sector information and analysis; Maintaining the integrity of Australia s wine labels and winemaking practices; Protecting the names of the wine producing areas of Australia and other countries; and Assisting in negotiations to reduce international trade barriers. WINE SECTOR INTELLIGENCE Providing information and analysis that supports informed decision making Wine Australia provides the wine sector with the latest industry statistics, information, data, analysis and insights to help make informed business decisions. COMPLIANCE Protecting the reputation of Australian wine Wine Australia s regulatory activities are aimed at protecting and enhancing the reputation, quality and integrity of Australian wine through licensing exporters, issuing permits for Australian wine exports and running a label integrity program to prevent false or misleading labelling. WINE AUSTRALIA CORPORATION ANNUAL REPORT OVERVIEW 4 OUR MISSION Identify and maximise the environment for sustainable demand for Australian wine. OUR VISION To be recognised as an innovative and respected industry partner acknowledged for leadership; value creation; and exceptional communication. OUR VALUES Integrity: We do what we say we will. Transparency: We strive to deliver a no surprises culture. Passion: We are passionate about achieving results for the success of the Australian wine industry. Understanding: We seek to fully understand by listening to and acting on feedback. Agile: Our agility enables us to adapt, grow and change as the industry requires. Accountable: We regard individual goals as commitments not intentions. WHAT WE DO MARKET DEVELOPMENT Building the reputation of Australian wine Wine Australia markets and promotes Australian wine domestically and internationally through strategies and activities in key markets. To help achieve this, Wine Australia has offices in Australia, the United Kingdom, the United States, Canada and China. Wine Australia protects the integrity of Australia s wine producing areas, maintains the Register of Protected Geographical Indications and Other Terms and supports the Geographical Indications Committee - a statutory committee established to define the grape producing regions of Australia. TRADE Addressing access barriers and removing trade impediments Wine Australia assists the wine sector with international market access issues by working to reduce trade barriers and developing a comprehensive understanding of regulatory requirements in key markets. STAKEHOLDERS AND OTHER INDUSTRY PARTNERS Wine Australia s principal stakeholders are the Australian Government and the wine producers who pay the Wine Grapes Levy and the exporters who pay the Wine Export Charge. Forty-two per cent of Wine Australia s revenue is drawn from these levy payers who have the right to vote at its Annual General Meetings. Wine Australia also works closely with other Australian Government agencies, such as the Department of Agriculture, Fisheries and Forestry, Grape and Wine Research Development Corporation (GWRDC), Tourism Australia, Austrade and the Department of Foreign Affairs and Trade. Other stakeholders include: The national, state and regional wine producer associations and bodies; Wine grape growers and their national, state and regional associations; Liquor boards, authorities and overseas governments; Importers, distributors and retailers; and The wine trade, sommeliers, wine educators and other influencers.

5 Chairman s Report CHAIRMAN GEORGE WAHBY It has been well documented that the Australian wine industry has had to navigate through many challenges in recent years, the most significant being the effects of a period of over supply, made more challenging by a historically high Australian dollar. Actions to clear inventories during this period have obscured the promotion of the quality and diversity of our wine offer in key markets around the world. However, the environment is shifting: we have an evolving export footprint and market mix, many of the opportunistic traders have come and gone and we are seeing growth at more sustainable price points. There are 30 million glasses of Australian wine consumed everyday around the world, produced by our 2,400 wineries and 6,200 grape growers, which is a solid foundation from which to further develop the sector. The quality of our wines has never been higher. In fact, the 2013 vintage is expected to be another exceptional vintage. The industry has always been known for its innovation, investment in research and ability to push the quality parameters. Supporting this with the long term, consistent investment in activities that build the reputation of the category and assist genuine businesses to position their wines at sustainable price points remains central to Wine Australia s focus. KEY MARKET OPPORTUNITIES The industry is working collectively to ensure there is greater awareness around the world of the quality and diversity of Australian wine, to help improve returns for grape growers and winemakers. This strategy to build a stronger perception of the quality of Australian wine is achieving cut-through, particularly in Asia where Australian wine has experienced 16% per annum growth over the past five years. China in particular is driving that growth and at higher and more sustainable price segments. China has now become the biggest market for Australian bottled exports above A$7.50 per litre, and remains a significant growth opportunity for our sector. The emerging Asian markets provide an exciting prospect, given their proximity, emerging middle class, population and the growing cultural interest in wine. The sector needs to continue to explore the opportunity in these markets. However, rather than supplying one-off opportunities, as is currently prevalent, investing in brand building in channels within markets, has to be the priority. In some of Australia s more mature markets such as the US, we are starting to see an improved shift in sentiment, with an increasing buzz and recognition of the high quality of wines available from Australia. In the UK, Australia remains the number one category for volume and value in the market. In the US, which remains the biggest premium imported wine market in the world, Australian wine is the second largest category. It is important that Australian wineries continue to support initiatives to take our diverse range of wines into these markets and increase our representation across the various price segments. STRATEGIC PRIORITIES Throughout the year, my first in this role, Wine Australia clearly articulated its priorities and delivered initiatives that provide the maximum return on investment for our industry partners and levy payers across the organisation s four main areas of responsibility: building the reputation of Australian wine; protecting the reputation of Australian wine through a credible regulatory system; addressing market access barriers and removing trade impediments; and providing information and analysis that supports informed decision making. Last year, the Wine Australia Board and management team identified six priorities for the organisation, in consultation with the industry, to help better position the industry to take advantage of some of the emerging opportunities. Here s an overview of what s been delivered against those priorities: 1. Provide appropriate support and cooperation to implement industry s proposal to merge Wine Australia and the Grape & Wine Research Development Corporation (GWRDC) WINE AUSTRALIA CORPORATION ANNUAL REPORT CHAIRMAN S REPORT 5

6 WINE AUSTRALIA CORPORATION ANNUAL REPORT CHAIRMAN S REPORT 6 The journey towards national structural reform for the wine sector continued, with the then Minister for Agriculture, Fisheries and Forestry approving plans to merge the Wine Australia Corporation and the GWRDC into one, unified wine sector statutory body to better align wine sector investment and priorities. Subject to the passing of the legislation the new Authority will commence operations on 1 July We acknowledge the broad industry support for this reform and the efforts of the Winemakers Federation of Australia (WFA), Wine Grape Growers Australia (WGGA), the GWRDC and the broader industry to achieve this outcome. The Board and management team are laying the foundations to prepare the organisation for this structural reform. 2. Deliver the Wine Australia website to provide a gateway to industry information, analysis, statistics and regulatory information. The new Wine Australia corporate and industry website was successfully launched and includes a range of new features to ensure levy payers can easily access the information they need including content to assist with navigating export processes and keeping abreast of changes to the regulatory environment; research, data, statistics and analysis to help inform business decision making and information on and subscription to the global program of user-pays market development activities. 3. Galvanise the industry behind our marketing strategy and implement effective marketing activities that help increase market share for Australian wine at sustainable price points, capitalise on growth activities and address the loss of market share to imports in the domestic market. Wine Australia continued to focus its core activities on positively positioning the quality, diversity and regionality of Australian wine through education programs and engaging with a global network of key influencers including sommeliers, importers, distributors, retailers, hotel food and beverage professionals, media, wine commentators and wine educators. Further, our user-pays activities were delivered to reinforce key messages through trade shows, themed tastings, Landmark Australia tastings, road shows, regional visits, retail promotions, and consumer facing events and activities. Wine Australia s focus in the domestic market continued to expand. Consumer promotions in the domestic market focused on Aussie Wine Month, which was expanded into a month long event and attracted a major retail partner Dan Murphy s. The month-long celebration included 130 events across 35 wine regions, which generated over 140 media mentions across the country. Trade education also become a major focus in the domestic market, with Wine Australia rolling out One Day Wine Schools and Sommelier and Trade Immersion visits to wine regions around Australia to help educate the domestic wine trade about the quality, diversity and regionality of wines from their own backyard. Central to the priority of building the reputation of our category, following the signing of the Memorandum of Understanding with Tourism Australia, Wine Australia has been developing a major, global campaign for 2013/14 that leverages our Australian Federal Government grant and attracts funding support from tourism bodies and our major wine industry partners. The campaign being developed in consultation with Tourism Australia and our wine industry partners, will aim to evolve the positioning of Australian wine; build a higher value, premium perception of Australian wine; and develop Australia s food and wine to be more relevant to the decision making process for travel to/ throughout Australia. The campaign will have two core components: From September 2013, Wine Australia and Tourism Australia will host delegates from all over the world at Savour Australia This event is the biggest and most comprehensive Australian food and wine forum ever undertaken. It will challenge outdated perceptions of Australian wine and uncover the domestic and global business case for wines from Australia. The three day business forum will showcase the quality and diversity of Australian wine and wine regions to the global wine trade, importers, distributors and wine/lifestyle media. Savour Australia 2013 will be followed by in-market consumer facing campaigns to run in key markets including events, promotions, digital communications and retail on- and off-premise activation through our trade partners. Wine Australia s continued focus on meaningful and detailed education of trade, key Influencers and consumers, overlayed with a consumer facing campaign promoting food, wine and tourism as a total package in partnership with Tourism Australia, in our view will help the industry maximise the market opportunities that lie ahead.

7 4. Increase our auditing activities and further develop the culture of compliance in our industry Wine Australia expanded its auditing capability to ensure the new regulatory and compliance approach introduced last year continues to protect the quality and integrity of Australian wine and is resourced to do so well into the future. Over 400 audits were conducted during the year with three export licenses suspended. 5. Work with government to assist the sector s competitiveness by achieving lower tariff and non-tariff barriers. Wine Australia participated in a range of influential global forums and organisations to help improve market access for Australian wine exports including the Asia Pacific Economic Co-operation (APEC) Wine Regulatory Forum, the World Wine Trade Group (WWTG), the Organisation of Vine and Wine (OIV) and the Trans Pacific Partnership negotiations. With free trade agreement negotiations being especially complex, patience is required, but it s critical that Wine Australia continues to have a seat at the table for these important forums, to create a favourable trading environment for Australian wine around the world. 6. Improve industry communication to raise awareness of positive industry news. Wine Australia continued to expand its communication platforms to communicate positive news about the Australian industry into markets around the world and to keep the industry updated with the latest market intelligence through editorials, events, the new Wine Australia website, e-newsletters and social media platforms including Facebook, Twitter, Sina Weibo in China, Instagram and a Vimeo video channel. In addition we have expanded our Wine Sector Intelligence and Compliance and Regulatory activities by holding information sessions in various wine regions. These forums form part of an ongoing program to ensure our wine community are aware of the information and tools available to them through the Wine Australia website and to help them navigate through the regulatory framework and changes. Wine Australia has also conducted briefings in the financial community to communicate the sector position, industry response and market opportunities with a view to improving the flow of capital in the sector. In addition to these strategic priorities, we have continued to reduce our investment in fixed costs and infrastructure and have developed a more flexible operating model that can deliver more efficient services to our levy payers and maximise the return on their investment. For example, in overseas markets, we have this year established an operating platform that operates independently of Austrade, and as a consequence we have a far lower commitment to staffing costs, office rental and other accommodation and related costs. The Wine Australia Board and management team continues to strive to ensure the organisation remains lean but is also adequately resourced to deliver its core levy payer services, provide export assistance, implement a global program of user-pays activities and deliver on its strategic priorities. It should be noted that whilst Wine Australia continues to operate within its means, reduced levies and an increase in some operating costs, has resulted in us prioritising investment between compelling initiatives. We have shared with the peak industry bodies the benefits that would follow greater investment in marketing to ensure the Australian industry captures opportunities in our key markets and realises the necessary sustainable growth. A particular highlight of my first year in the role of Chairman was the opportunity to work with the many dedicated wine producers who are the backbone of this industry. I would like to thank the Board and the management team for their support as I ve transitioned into my new role. I would particularly like to thank out-going Chief Executive, Andrew Cheesman, for his exemplary leadership over the past four years. Andrew is a passionate advocate for the Australian wine sector and has been a key driver of change in the industry s national organisations. During his tenure he has transformed Wine Australia, ensuring the delivery of key services for the sector, especially during the difficult trading environment over the past few years. I wish him well for the future. I would also like to welcome Andreas Clark who will take on, in addition to his COO role, the position of Acting CEO. I am sure Andreas with his knowledge and experience will be well positioned to guide the organisation leading into the merger with GWRDC. I would also like to acknowledge the hard work of Wine Australia s global team a group of very passionate and dedicated people who are doing everything they can to maximise the environment for the sustainable demand for Australian wine. I look forward to working with you, our levy payers and industry partners, as we look at ways to convert emerging opportunities into long term, sustainable business: that s an exciting outlook. George Wahby Chairman WINE AUSTRALIA CORPORATION ANNUAL REPORT CHAIRMAN S REPORT 7

8 Chief Executive s Report CHIEF EXECUTIVE ANDREW CHEESMAN Focusing on actions that best support industry s return to sustainable profitability and restoring value in underlying assets must be the key objective for WFA, WGGA and the statutory bodies. The industry bodies at a national, state and regional level are working closely to ensure the general policy framework and operating environment is set appropriately to allow any genuine business model to operate successfully. The industry needs to commit to re-establishing itself as a global leader in each emerging, developing and mature market and in doing so define potential growth opportunities in each market segment. Only by targeting modest, long term, whole of industry sales growth to absorb current over production can we achieve the much sought industry prosperity. It is important that the collective will of the industry be applied towards the following: WINE AUSTRALIA CORPORATION ANNUAL REPORT CHIEF EXECUTIVE S REPORT 1. Rebuild and grow total industry profitability with the aim of restoring and increasing the total market value of Australian wine industry assets. An appropriate measure of success would be an increase in the market value of industry s assets over time (vineyards, wineries and brands). 2. Improve and increase our relative market share in targeted emerging, developing and mature markets while performing equal to, or better than the whole market in each sustainable category or segment. Only if Australia can operate and grow in the sustainable categories in each market can we regain and grow our position and influence as a leader in the global wine industry. 3. Operate in a trading environment free of distortion so that companies can protect and grow their share through quality, innovation and investment in marketing, distribution and sales. 4. Seek modest long term growth in our total industry size and profitability to underwrite sustained value preservation and growth of our industry assets. 5. Set and implement industry policy that is consistent with the above and to actively discourage policy development that favours one industry sector over another. Policy levers are implemented that stand the test of whole of industry benefit rather than specific corporate or sector interest. The peak industry bodies will drive key policy reforms to achieve these outcomes. The role Wine Australia can play beyond core operating activities is to: Attract greater investment behind initiatives to increase the local and export demand opportunity for Australian wine. Further funds are required so that Wine Australia can deliver higher profile, more visible activities thereby increasing the reach and impact of the activities and accelerating a return to the Australian category by trade and consumers in key markets; Establish control of our data collection and reporting. Rather than relying on third parties, it is logical for a web based IT interface to be built and owned by the sector to efficiently collect viticulture and wine production data, together with inventory and domestic and export sales data; Contribute data and analysis that ensures balanced, evidence based and rigorous debate is undertaken to achieve appropriate outcomes that support the development of a responsible drinking culture and address legitimate concerns about the misuse of alcohol: and Fully co-operate with industry policy directed towards further consolidation and alignment of national, state and regional organisations. Allocating funds to these priorities will assist industry to maximise its opportunities for success, achieve sustainable profitability and restore value in underlying assets. The Australian wine sector is starting to emerge from a challenging period. While there are still key issues to address, the most significant being a lack of profitability through the supply chain, some of the macro factors affecting the sector are continuing to improve. Significantly, supply and demand are more balanced and wine stocks are at more manageable levels. At a global level, reports by the International Organisation of Vine and Wine (OIV) indicate that the global wine industry is moving from oversupply to a so-called deficit, with wine production at the lowest levels recorded in 37 years due to a combination 8

9 of structural and seasonal forces. Global demand for wine continues to increase and a premiumisation trend is evident in key markets. Sales growth in the Australian domestic market is at higher prices, the value per litre of bottled export shipments has increased by 11% since lows experienced in 2010, and bulk wine prices have firmed up, with the average value per litre of bulk wine shipments now over $1 per litre. While Australia represents just 4% of global production, it is one of the top four exporters of wine in the world. While the volume of Australian wine exports declined this year, bottled wine exports continued to grow at higher price points. This is significant because while the shipment of higher priced wines above $7.50 per litre represents only 4% of the volume of wine exports, it represents 23% of the total value of wine exported. The $7.50 to $9.99 per litre segment recorded growth on a moving annual total (MAT) basis for the first time in six years, up by 2.3% to 10 million litres, while the above $10 per litre segment grew 5.3% to 16 million litres. It is important that our marketing programs continue to focus on supporting this growth, as these segments are where Australia is under represented in key markets and growth in these segments will provide benefits to the entire category. It is a challenging time, however, one during which a galvanised approach to key sector priorities will enable us to capture the opportunities and set the industry up for future value growth. HIGHLIGHTS DURING THE YEAR Wine Australia continued to build on some of the new initiatives that were introduced last year to help evolve the organisation and to deliver the most value for our industry partners and levy payers. Notably, we attracted strong sign-up from wine producers and brands, regional wine associations and state bodies to our first global program of user-pays activities as part of the Wine Australia Market Program Prospectus, with all initiatives successfully undertaken in our key markets around the world. This partnership approach has enabled Wine Australia to achieve far greater reach with its marketing and educational efforts and provided our partners with an opportunity to reach influential trade, media and consumers in key markets around the world. Throughout the year, we delivered a range of core services and initiatives to help deliver the most value and return on investment for our levy payers with particular focus on delivering our A+ Australian Wine educational programs; working with a global network of sommeliers, importers, distributors, retailers, wine educators, wine and lifestyle media, wine commentators, bloggers, other Australian Government agencies and key influencers to promote the diversity, regionality, and quality of Australian wine; delivering a global program of public relations, media relations, online communications and social media to generate news about Australian wine among our global network of influencers; providing the latest market intelligence, analysis and data; and providing export assistance. The new, overhauled regulatory and compliance system has been operating successfully for a year, underpinned by a rigorous auditing presence that continues to protect the quality and integrity of Australian wine. This year, we expanded our auditing presence, which enabled us to undertake over 400 audits of wine producers and exporters to uphold the quality and integrity of Australian wine. This year, we launched a new Wine Australia corporate and industry website As part of this project, we improved the content and format of our data, statistics, analysis and reports. We have now made this information available to all levy payers in the grape grower, winemaker and exporter communities. The new site significantly improves the accessibility to information for levy payers, thus helping sector participants to navigate the compliance and regulatory framework and make more informed business decisions. Key achievements throughout the year are detailed in the function and market reports included within the annual report. However, at an organisational level, key progress included: Establishing our operations independent of Austrade in export markets with a resultant lower cost structure and greater agility to respond to market opportunities; Entering a Memorandum of Understanding (MOU) with the Winemakers Federation of Australia (WFA) to foster greater inter agency cooperation and accountability; Continuing to support the merger process with GWRDC to deliver a single statutory authority by 1 July On 24 June 2013, the Australian Government introduced into the Parliament the Grape and Wine Legislation Amendment (Australian Grape and Wine Authority) Bill 2013 (the Bill). The Bill provides for the establishment of the Australian Grape and Wine Authority on 1 July The Authority will undertake the functions of the Corporation and the GWRDC. The assets, staff and functions of the Corporation and the GWRDC will transfer to the new Authority; Attracting support and funding from GWRDC for two key market research projects in the UK and USA. The research was completed and results have been reported. Extension of insights will now be communicated to industry; Cementing our very strong ties with Tourism Australia by entering a Memorandum of Understanding. The MOU formalises our partnership and outlines specific areas for collaboration including promotional campaigns, digital WINE AUSTRALIA CORPORATION ANNUAL REPORT CHIEF EXECUTIVE S REPORT 9

10 WINE AUSTRALIA CORPORATION ANNUAL REPORT CHIEF EXECUTIVE S REPORT marketing, public relations, consumer shows, special events and distribution development, as well as allocated funding for some of our key markets including China, the US, Canada, the UK and Australia. This partnership is a very exciting prospect for our wine community as we move the promotion of wine firmly into the lifestyle sector, with activity focused on the combination of food, wine and tourism. Tourism Australia will be launching a consumerfocused food and wine campaign next year in partnership with Wine Australia, to promote Australia s premium food and wine experiences. Wine Australia is a member of Tourism Australia s food and wine advisory group to guide the development of the food and wine strategy and ensure the quality, regionality and diversity of Australian wine is reflected. This is a major opportunity for Australia s wine sector and the chance to extend our consumer reach in a way and on a scale that has never been done before. As a precursor to Tourism Australia s campaign, Wine Australia used part of the first instalment of the $2.1 million Australian Government grant, allocated through last year s Federal Budget, to create Savour Australia 2013 Australia s first global wine forum, which will be held in Adelaide from 15 to 18 September This is the biggest, most comprehensive Australian wine forum ever undertaken and involves around 750 of the world s wine trade, media and Australian wine producers coming together to challenge the world s perception of Australian wine. Its unique combination of business sessions - led by the world s leading authorities on retailing, digital and social marketing, pricing, supply and demand, global trends, distribution and consumer behaviour; tasting opportunities through Landmark Australia tastings, a Grand Tasting and tasting bars; networking lounges; and themed lunches and dinners, will give Australian producers the opportunity to showcase their wines to the world and do business with the world s wine trade on Australian soil. The event will help us to engage and excite our global network of distributors, importers, retailers, sommeliers, hotel food and beverage professionals and other on- and off-premise specialists to get our quality wines onto the world s wine lists and retail shelves. Savour Australia 2013 is a major undertaking for Wine Australia and the entire industry. Throughout the year, our focus has been to build the event from the bottom up including: Working in partnership with some of Australia s leading wine brands to guide the development of the forum, attract the world s leading wine authorities as speakers and panellists, create themed Landmark Australia wine tastings and showcase Australia s best food and wine experiences. Confirming over 160 of the world s leading wine media and trade professionals Wine Australia is hosting for the event and as part of a pre/post tour through some of our wine regions. Confirming some of the world s leading authorities to deliver the business sessions and lead lively discussions. Creating dedicated networking lounges, themed lunches and dinners throughout the program to give opportunities for Australian wine producers to meet and do business with the wine trade. Creating numerous opportunities for Australian wine producers in the Savour program to showcase wines during the event at lunches, dinners, tasting bars, the Grand Tasting and Landmark Australia tastings and network with trade and media. Working with regional wine associations to create a series of regional visits for hosted trade and wine media. Uniting the Australian wine sector to get behind the event, maximise the opportunity and demonstrate our united and confident industry to the rest of the world. The forum will be an important step in the delivery of the sector s marketing strategy, providing an opportunity to further dispel myths about the Australian wine category and raise greater awareness about the quality and diversity of Australia s wine offer. FRAUD CONTROL I certify that Wine Australia has put in place appropriate fraud prevention, detection, investigation, reporting and data collection procedures to meet the specific needs of the organisation and comply with guidelines. No incidents of fraud were detected throughout the year. LOOKING AHEAD The Australian wine industry still has some way to go to address profitability issues in the supply base and this remains a focus, however, it is also important to invest in the market opportunities to achieve a sustainable future. In keeping with this, our major focus for the first half of next year will be on delivering Savour Australia 2013 and maximising this significant opportunity for the industry, to ensure the benefits for the sector continue long after the wine trade and media have left Australia. The forum will also lay the foundations for Tourism Australia s food and wine campaign, to build a higher premium perception of Australian wine and develop the country s food and wine offering to be more relevant to purchasing decisions and the decision making process for travel to, and within Australia. As we work to continue to influence our global network of wine trade and media, we will be working closely with Tourism Australia to influence the food and wine strategy and associated global consumer campaign, and broaden Australian wine s consumer reach. 10

11 Wine Australia will continue to innovate and find new ways to provide return on investment for levy payers through: exploring options to make the online export approval interface simpler and more user friendly; continuing to work with industry partners including wine producers, regional wine associations, state wine bodies and industry bodies to align industry resources and strategies and provide partnership opportunities through a global program of user-pays activities and events; working with WFA and WGGA to address issues of great importance for the sector and the community including ensuring balanced, evidence-based and rigorous debate is undertaken to achieve appropriate outcomes that support the development of a responsible drinking culture and address legitimate concerns about the misuse of alcohol; working with government bodies in Australia and around the world including Austrade, the Department of Foreign Affairs and Trade (DFAT), the Department of Agriculture, Fisheries and Forestry (DAFF) and Tourism Australia to pool resources and deliver favourable outcomes for the wine sector; working with governments and industry groups in Australia and around the world to assist the sector s competitiveness through lower tariff and non-tariff trade barriers; identifying new ways to communicate the latest data, market intelligence and analysis to help producers and growers identify sustainable business opportunities and understand the operating environment. It has been a tremendous honour to lead the team at Wine Australia over the last four years during a period of significant change. The Wine Australia team has achieved a great deal in that time. I have enjoyed the challenges of the role and am humbled by and grateful for the support I have received from our wine community, the Wine Australia board and the Wine Australia team. Wine Australia has a very hard-working and highly capable team working tirelessly to help industry maximise emerging opportunities for the sector. I wish Andreas and the team, and all our stakeholders, the very best as the industry moves towards creating a more sustainable future. Andrew Cheesman Chief Executive WINE AUSTRALIA CORPORATION ANNUAL REPORT CHIEF EXECUTIVE S REPORT 11

12 Year in Review STATE OF THE INDUSTRY 13 MARKET DEVELOPMENT 17 WINE SECTOR INTELLIGENCE 23 COMPLIANCE 26 TRADE 28 GEOGRAPHICAL INDICATIONS COMMITTEE 30 FINANCIAL RESULTS 30 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW MARKET OVERVIEWS 31 ASIA 32 UK/IRELAND/EUROPE 36 NORTH AMERICA 39 EMERGING MARKETS 44 12

13 STATE OF THE INDUSTRY Winegrape crush and purchase prices up in 2013 The Winemakers Federation of Australia s 2013 Vintage Report estimates the national winegrape crush at 1.83 million tonnes, up 10% on the 2012 crush of 1.66 million tonnes. The 2013 crush is the largest since The increase was driven largely by higher yields in the Riverina and Murray Valley-Swan Hill regions while results were mixed for other regions. Growing conditions were generally relatively benign with ample water for irrigation, however, the summer was hot and dry. Some regions experienced a dry winter and growing season which lowered yields. Both red and white categories recorded increases in the size of the crush. Red varieties increased 14% to 946,000 tonnes which was double the increase of white varieties which were up 7% to 888,000 tonnes. Once again Shiraz was the number one variety in Australia, accounting for 432,000 tonnes which was an increase of 14% over Cabernet Sauvignon was the second placed red varietal, up 14% to 250,000 tonnes. The other major red varieties, Merlot (up 6% to 132,000 tonnes) and Pinot Noir (up 24% to 42,000 tonnes) also recorded a larger crush. Together, these four varieties accounted for 90% of all red winegrapes crushed in Chardonnay remained Australia s flagship white variety and the second most crushed grape in 2013 accounting for 45% of the total white crush. The Chardonnay crush increased 7% to 397,000 tonnes. There were mixed results among the other major white varieties. Sauvignon Blanc (up 11% to 98,000 tonnes), Muscat Gordo Blanco (up 15% to 71,000 tonnes), Colombard (up 10% to 67,000 tonnes) and Pinot Gris/ Grigio (up 9% to 62,000 tonnes) recorded a higher crush than the year before. Conversely, Semillon (down 6% to 77,000 tonnes) and Riesling (down 4% to 31,000 tonnes) declined. Wine Australia s 2013 Winegrape Purchases Price Dispersion Report presents the distribution of tonnages purchased across the price spectrum. The data was collected from a relatively small sample of major winegrape purchasers and others that are significant in key regions but covered an estimated 80% of winegrape purchases. Over 31,000 separate transactions were collected and form the basis of the report. The report provides price dispersion read-outs and average purchase prices for varieties-by-region. The survey collated the pricing spectrum of 1,067,000 tonnes of winegrape purchases valued at $532 million, equating to an average purchase price of $499 per tonne. The average price was 9% higher than the previous year. It was the second year in a row that prices increased, albeit from a low base. Of the top 10 varieties, Shiraz, Cabernet Sauvignon, Pinot Gris and Pinot Noir all recorded an average purchase price growth above double digits. The average purchase price of Chardonnay, Merlot, Sauvignon Blanc and Colombard also increased but at smaller rates. Conversely, declines were recorded for Muscat Gordo Blanco and Semillon. Wine Australia s 2013 Vintage in Review provides a summary of the 2013 vintage from 49 of Australia s wine regions. In South Australia, dry growing conditions generally resulted in lower yields with great quality, however, regions with access to irrigation were able to sustain good yields. Yields were also up in the south of the state. Tasmania reported an extraordinarily good season, contributing to great quality and yields across varieties around the island. Late rains in Queensland complicated the harvest, particularly of red varieties. The difficult conditions are being better managed as the state s wine regions mature. New South Wales also experienced a dry growing season but other weather factors were generally favourable. The conditions contributed towards reduced disease pressure which was welcome relief for those regions that have had a run of difficult vintages. The wines produced from 2013 are reported to be of high quality with all regions identifying some exceptional varietals. Dry growing conditions also affected Victoria. Outside of Murray-Darling/Swan Hill the harvest was down in terms of tonnage, however, it was generally reported to be trouble free in terms of disease pressure. A common theme from the reports was that the wines featured great flavour with balanced, natural acid. Western Australia experienced a hot, dry summer followed by some rain events during harvest. The winter was also dry, which contributed to lower yields in the state s regions. The conditions were conducive for low disease pressure. Each region reported different standout varietals with overall high quality. Production and stock levels increase In , wine production increased by 108 million litres to 1.23 billion litres, the highest in four years. Wine inventories also increased to 1.7 billion litres, up 32 million litres over the previous year. The stocks to sales ratio edged up higher to WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 13

14 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 1.45 which is still well below the 1.64 recorded in Australian wineries cleared 217 million litres of wine in the two years to , however, with inventories increasing in and a large crush in 2013, it is more than likely that wine inventories have crept higher again in Domestic sales flat According to the Australian Bureau of Statistics (ABS), domestic sales of Australian wine increased by 0.1% to 459 million litres in the 12 months ended March Red wine sales increased by 7.0% to 179 million litres while white wine sales declined by 5.2% to 222 million litres. Sparkling wine sales also increased to 36 million litres, up 2%. The increase in bottled sales was partially offset by a decline in soft-pack sales. Bottled wines increased by 1% to 51% while the soft-pack share declined by 5% to 28%. Sales in bulk increased strongly. In the domestic off-trade market, Nielsen reported a decline in total Australian sales of 6% to 227 million litres valued at $2.5 billion in the year ended February Despite the decline in sales volume, the average price of Australian wine increased over the year. In the bottled off-trade market, Sauvignon Blanc was the most popular varietal, up 10% to $508 million, however, much of this is of New Zealand origin. Shiraz was the second highest selling varietal, up 6% to $281 million. The multi-year decline in Chardonnay sales continued during the year, down 4% to $246 million. The decline in Chardonnay is predominantly at the lower end while sales of Chardonnay priced above $20 per bottle are growing at double digit rates. Other varietals recording value growth included Pinot Gris/ Grigio, Moscato and Semillon/Sauvignon Blanc. Meanwhile, sales of Cabernet Sauvignon and Merlot were flat and Cabernet/Merlot and Shiraz blends were down. Export volume down, growth in the premium segments In , the volume of Australian wine exports declined by 2.1% to 698 million litres valued at $1.82 billion (FOB). The average value of total exports was stable, however, the average value of bottled wine increased 2% to $4.50 per litre while bulk wine increased 0.7% to $1.02 per litre. The decline in volume was driven by red wine exports which were down 6.7% to 406 million litres, offsetting an increase in white wine exports which were up 5.3% to 277 million litres. This may be partially due to stocks of red wine declining in the year prior whereas white wine stocks increased. In other words, the industry started with less red wine in stock and more white wine compared to the previous year. Growth in exports above $7.50 per litre was offset by declines at the lower price segments, particularly below $2.50 per litre. Exports above $10 per litre grew 5.3% to 16 million litres while the $7.50 to $9.99 per litre category grew 2.3% to 14 million litres. It was the first financial year since that growth was achieved in the $7.50 to $9.99 segment. These segments accounted for just 4% of the total volume yet the value share was far more significant at 23%. In contrast, the segments below $2.50 per litre represented 56% of the volume but accounted for 23% of the value, the same value share as above $7.50 per litre. Exports of bottled wine declined 4.9% to 316 million litres while bulk exports increased marginally, up 0.4% to 375 million litres. The shift towards exporting wine in bulk as opposed to bottles over the past few years appears to have stabilised. The share of wine shipped in bulk increased by 0.3% to 54%. There were 1,367 active exporters in , up from 1,309 in the previous year. Just under 60% (798 exporters) recorded an increase in exports while the remaining 569 recorded a decline. Focus on China and Hong Kong continues with the number of exporters to these markets increasing to 1,042, the most to any destination. Singapore recorded the second highest number of exporters with 280, ahead of Australia s biggest volume destinations including the UK with 273 exporters, Canada with 253 and USA with 226. Australian wine was exported to 123 different countries, one country less than the previous year. 61 countries recorded volume growth while 62 countries recorded declines. Many of the export destinations recorded relatively low volumes: only 26 of the 123 export markets exceeded one million litres. The United Kingdom remained the number one destination by volume, accounting for 246 million litres. The United States accounted for 190 million litres while Canada (49 million litres), China (41 million litres) and New Zealand (32 million litres) rounded out the top five. Together, these markets accounted for 80% of the total export volume. Australia is well positioned in each of these markets in volume terms. Australia is the number one imported wine into the UK and New Zealand, second in the US, and fourth in Canada and China. Australia remained the world s fourth largest exporter by volume, behind Italy, France and Spain. Australia also ranks fourth among the world s ten biggest wine exporters in the average value of bottled wine exports, behind New Zealand, France and the US but ahead of Argentina, Italy, South Africa, Germany and Chile. 14

15 United Kingdom s excise elevator was still biting but has now ended According to Nielsen, total sales of wine in the United Kingdom off-trade market declined by 2.4% to 89.7 million cases in the year ended 5 January However, the average price of wine increased by 3.8% to 4.99 per bottle, offsetting the weakness in sales volume, hence the total value of sales increased by 1.5% to 5.4 billion. Not all of the revenue from increased sales was received by participants along the wine supply chain due to the increase in excise levy by the UK government. Excluding Value-Added-Tax (VAT), 2 from every bottle of wine sold went directly to the UK government. The increase in excise has resulted in the sub- 3 segment becoming unviable and sales accordingly declined by 51%. In 2010 this segment accounted for 8% of total sales but now accounts for just 1%. The excise effect has been impacting adversely on all price segments below 5 per bottle. Conversely, every price segment above 5 per bottle recorded growth. Furthermore, there appears to be a shift towards the premium end of the wine spectrum with the higher price points recording relatively stronger growth. Australia remained the market s number one supplier by both volume and value with its performance largely mirroring the overall market. The price segments sub- 5 per bottle declined while the majority of price segments above that price point recorded increasing sales. Australia s strongest growth was recorded in the 8.01 to 9.00 per bottle which grew 25% to 290,000 cases. US consumers seek premium wines Information Resources Inc (IRI) reported a 2% increase in total off-trade sales in the US to 132 million cases valued at US$10.9 billion in the year ended May The average price of wine increased strongly, up 4.3% to $6.80 per bottle. The increase was driven by consumers exiting the price segments below US$5 per bottle and increasingly seeking wines in the higher price segments. Sales of wine priced above US$20 per bottle increased by 15% to 2.5 million cases and the US$15.00 to US$19.99 segment increased by 9% to 4.6 million cases. Domestic product, which accounted for three-quarters of sales, was the primary driver of growth with value up 7% to US$8 billion. Italy, France, Argentina and New Zealand recorded strong sales growth while Australia, down 5% to US$656 million, recorded the weakest performance of the major suppliers. Despite weakness in the Australian category, Australia remained the second largest source of imported wine. Growth was mixed depending on the price range and there was a general shift towards Australia s premium offering. Strong growth was recorded in the US$15.00 to US$19.99 per bottle segment, up 15% to 190,000 cases, while sales above US$20 declined slightly. The US$5.00 to US$7.99 per bottle segment, which accounts for 83% of Australian sales, was relatively stable, declining by 1% to 7.2 million cases. The strongest rate of decline was recorded in the segments below US$4.99 per bottle. Australia under-performs in Canada The Association of Canadian Distillers reported 2% growth in Canada s wine market to 44 million cases. The growth was driven primarily by Alberta (up 8% to 3.7 million cases), British Columbia (up 3% to 6.8 million cases) and Ontario (up 1% to 13.3 million cases). The largest wine market in Canada, Quebec, recorded a marginal decline in sales to 16.4 million cases. Australia s performance was in perfect contrast with the market shifts outlined above with an overall decline in national sales, growth in Quebec, and a decline in the growing markets of Alberta, British Columbia and Ontario. In Quebec, Australian sales increased by 1% to 1.5 million cases, however, this growth was driven primarily by one brand. A number of other Australian brands recorded growth but generally most recorded declining sales. Australian value growth leading the world in China Global Trade Information Service (GTIS) reported that Chinese wine imports recorded the slowest rate of growth in five years, up 4% to 399 million litres valued at US$1.6 billion in The rate of growth was subdued due to declining bulk wine imports which were down 19% to 101 million litres. All of the major bulk wine suppliers recorded a decline in shipments with the exception of Chile, which recorded a 41% increase in bulk imports to 46 million litres. Chilean exporters benefit from a Free Trade Agreement with China which gives it a competitive advantage, particularly in the bulk segment. However, even after the duty is taken into consideration, the average price of bulk Chilean wine is higher than competitors such as Spain and Italy. The growth in bottled wine imports offset the weakness in bulk wine shipments, however, the rate of growth was the slowest in 12 years. Despite the weak rate of growth, the absolute volume of growth was still the fourth highest on record. Total bottled shipments increased by 14%, or 36 million litres, to 290 million litres valued at US$1.4 billion. Australian imports increased at a slower rate of 9% to 37 million litres. Australia s focus shifted towards the premium end and the average value WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 15

16 increased by 9% to US$6.52 per litre: the highest average value of the top 10 source countries. Conversely, French bottled wine recorded a 21% decline in average value to US$5.01 per litre. Australia was the most successful source country in terms of absolute value growth of bottled shipments. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW New Zealand wine imports decline During , wine imports into Australia increased by 2% to 84 million litres. The rate of growth was the slowest after 12 years of sustained annual growth. It was also the first year in the same period that imports from Australia s primary source, New Zealand, recorded a decline in shipments, down 7% to 51 million litres. The decline was driven primarily by bulk white wine but also, to a lesser extent, bottled white wine. Conversely, French imports were up 25% to 14 million litres, driven by increased sparkling and red wine shipments. Italian imports also increased by 24% to 9 million litres, predominantly due to increased red wine shipments. To a lesser extent Spanish wine imports also increased, again driven by the red and sparkling category. In the bulk segment, increased shipments from South Africa roughly offset the decline in shipments from Chile. 16

17 WINE AUSTRALIA ACTIVITIES Wine Australia s operations in the year under review were delivered in line with: OUTCOME TO ENHANCE THE OPERATING ENVIRONMENT FOR THE BENEFIT OF THE AUSTRALIAN WINE INDUSTRY The objects of the Wine Australia Act 1980 The Corporate Plan strategies; and The Annual Operational Plan (AOP) actions aimed at contributing to the achievement of those strategies OUTPUT 1 MARKET DEVELOPMENT OUTPUT 2 WINE SECTOR INTELLIGENCE OUTPUT 3 COMPLIANCE OUTPUT 4 TRADE 1. MARKET DEVELOPMENT OUTPUT: KEY MEASURE OF SUCCESS: Create a market environment that acknowledges and responds positively to Australian branded wine as a premium product. A 3% increase in the percentage of shipments of bottled wine exports > the current MAT average of $4.00 per litre. A 1% increase in market share for Australian wine in the Australian domestic market, measured by wholesale sales data RESULT: A 2% increase in the average value of bottled wine shipments to $4.50 per litre. A 1% decrease in market share for Australian wine in the Australian domestic market to 84%, measured by wholesale sales data. STRATEGY #1 Targeted trade education programs to build confidence and insights AOP actions Deliver engaging seminars and tastings with distributors, importers, retailers, sommeliers and other key influencers. Deliver trade focused, market specific education programs that promote our best wines as being second to none and that evolve our positioning towards a stronger perception of quality, diversity and value. Partner with third party organisations including agents, distributors and wine educators to ensure Australian content is updated and current and is appropriate for global consumer and wine trade education. Establish educational scholarship opportunities with approved providers to deliver Australian wine sector perspective and experience. Introduce One Day Wine schools and other activities for targeted trade and consumer groups. Wine Australia s Activities Education of the wine trade, key influencers and consumers is a key focus for Wine Australia. The global educational programs continued to raise awareness among key wine trade and media influencers about the rich diversity of Australian wines with a focus on quality and regionality. This year, Wine Australia transitioned the A+ Australian Wine brand to become the overarching brand exclusively for all Wine Australia s educational programs globally including A+ Australian Wine Schools, One Day Wine Schools and the Sommelier Immersion Program (SIP), which are funded through the industry levies. Wine Australia also introduced greater consistency to its global educational programs by expanding the role of North American Education Director, Mark Davidson, to Global Education Director, to provide his educational expertise across all markets globally. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 17

18 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 18 Trade education Savour Australia 2013 Wine Australia used part of the first instalment of the $2.1 million Australian Government grant, allocated through last year s Federal Budget, to create Savour Australia 2013 Australia s first global wine forum, which will be held in Adelaide from 15 to 18 September This is the biggest, most comprehensive Australian wine forum ever undertaken and involves around 750 of the world s wine trade, media and Australian wine producers to challenge the world s perception of Australian wine. Its unique combination of business sessions led by the world s leading authorities on retailing, digital and social marketing, pricing, supply and demand, global trends, distribution and consumer behaviour; tasting opportunities through Landmark Australia tastings, a Grand Tasting and tasting bars; networking lounges; and themed lunches and dinners, will provide wineries the opportunity to showcase their wines to the world and do business with the world s wine trade on Australian soil. The event aims to engage and excite the global network of distributors, importers, retailers, sommeliers, hotel food and beverage professionals and other on- and off-premise specialists to get quality Australian wines onto the world s wine lists and retail shelves. The forum is a major undertaking and will be an important step in the delivery of the sector s marketing strategy, providing an opportunity to further dispel myths about the Australian wine category and raise greater awareness about the quality and diversity of Australia s wine offer. Throughout the year, Wine Australia focused its efforts on creating the event from the bottom up including: Working in partnership with some of Australia s leading wine brands to guide the development of the forum, attract the world s leading wine authorities as speakers and tasting panellists, create themed Landmark Australia wine tastings and showcase Australia s best food and wine experiences. Confirming over 160 of the world s leading wine media and trade professionals Wine Australia is hosting for the event and as part of a pre/post tour through some wine regions. Confirming some of the world s leading authorities to deliver the business sessions and lead lively discussions. Creating dedicated networking lounges, themed lunches and dinners throughout the program to give opportunities for Australian wine producers to meet and do business with the wine trade. Creating numerous opportunities for Australian wine producers in the Savour program to showcase wines during the event at lunches, dinners, tasting bars, the Grand Tasting and Landmark Australia tastings and network with trade and media. Working with regional wine associations to create a series of regional visits for hosted trade and wine media. Uniting the Australian wine sector to get behind the event, maximise the opportunity and show a united and confident industry to the rest of the world. Attracting event sponsors and partners through a selection of ticket packages and partnership opportunities. Attracting a selection of leading Australian chefs and food producers to create the food experiences to match the wine experiences throughout the event. Undertaking an integrated, global communications campaign to attract the world s wine trade, media and Australian wine producers to participate. Developing a Savour Australia website that featured a ticket booking mechanism. Other major trade education activity includes: Australia: Wine Australia rolled out the first ever A+ Australian One Day Wine Schools for the domestic wine trade in Sydney and Melbourne, to create greater understanding of the diversity, quality and regionality of wines from across the country. The top 10 participants from this program were taken on an immersion trip around Australian wine regions. Wine Australia also rolled out the Sommelier Immersion Program (SIP) in the domestic market. Twenty Australian sommeliers finalists in Gourmet Traveller Wine s Wine List of the Year Awards were selected to participate in the inaugural SIP trip, where they had the opportunity to experience Australian wine regions, wines and the people behind the wines. USA: Trade education efforts centred around engaging on-premise influencers, retailers and educators. The six-part SIP continues to be adapted and expanded. The program s success has extended beyond its original education goals and continues to engage members of the trade and generate hundreds of listings, multiple restaurant events and promotions. This year, Wine Australia also held The Next Chapter trade and media tasting events in San Francisco and New York, which attracted record attendance of over 250 trade and media. The events generated wide reaching media coverage and excitement about Australian wine among the wine trade and have contributed to a positive shift in sentiment among trade and wine influencers in the USA. Canada: Wine Australia s trade engagement focused on expanding relationships and programs with the liquor

19 boards. Wine Australia created support activities around Vintages Releases with the Liquor Control Board of Ontario (LCBO), and worked with the British Columbia Liquor Distribution Branch (BCLDB), New Brunswick and Nova Scotia to customise Australian thematics. Wine Australia also introduced a one-day SIP education seminar to key on-premise trade and media in Toronto. China: Wine Australia continued to expand its A+ Australian Wine School, delivering the program to over 3,400 trade, media and consumers across China. Throughout the year, Wine Australia certified and trained another five A+ Australian Wine educators to deliver the program, with over 14 educators now qualified to deliver the program. Other trade education initiatives in China throughout the year included Taste Discovery Roadshows in first and second tier cities; hosting an Australian pavilion for the first time ever at the Chengdu Sugar and Spirits Fair China s most established and influential food and wine trade show; and a Shiraz Masterclass, hosted by one of Australia s best known wine educators Jeremy Oliver, for over 300 influential media, educators and on-and off-trade professionals. Japan: The Asia-wide A+ Australian Wine School educational platform supported 12 Level 1 Introduction to Australian Wine courses which reached more than 300 students of wine at various wine schools in Tokyo and Osaka, taught by four A+ Specialist Educators. Level 2 Intermediate course contents have been translated into Japanese and a number of other Asian languages. Wine Australia continued to expand its A+ Australian Specialist Program, now in its second year in Japan, which includes a community of 20 trade, 11 honorary and four educator specialists who are the official torchbearers for Australian wine across key regions in Japan. UK, Ireland, Europe: The One-Day Wine School was further developed with a regional Roadshow taking the school beyond Australia House in London, to Manchester, Leeds and Glasgow. A series of nine varietally or stylistically themed Masterclasses were hosted, each featuring mini-verticals and all prefaced with a free-pour tasting. This program culminated in a Landmark Tour Day of Masterclasses and a separate free-pour tasting of more than 100 wines around the theme of the wine that inspired me, as determined by those in the trade who had visited Australia in the past few years. Also new to the program of trade education was the launch of the Tasting Blind Club which brings together a group of targeted wine trade professionals each month to test themselves and enjoy debate on the collection of wines that includes benchmark examples from around the world. Emerging markets: The A+ Australian Wine School continued to expand across emerging markets with the A+ Australian Wine One Day Wine School operational across Singapore, South Korea, India and most recently, Mexico. The program delivers education and training on Australian wine, ensuring a greater awareness and appreciation of Australia s diverse and high quality wines. Wine Australia also actively supported engagement between the Australian wine sector and emerging markets through participation in trade fairs, including the Hong Kong International Wine and Spirits Fair, through facilitation of sales opportunities, connecting buyers with appropriately matched wine companies, and through securing more than 50 prospective buyers from across Asia to meet with Australian wine companies at Savour Australia Consumer education Major consumer education activity includes: Australia: Wine Australia partnered with Riedel for the first time at the Good Food and Wine Shows across Sydney, Melbourne and Perth (Brisbane to be held in November 2013), conducting Australian wine Masterclasses for Australian food and wine lovers to a cumulative audience of approximately 2,000 consumers. These Masterclasses received positive feedback from the attendees particularly for the insights provided around the regionality and diversity of Australian wine. Wine Australia also continued its varietal Masterclasses with food matching alternatives at the Noosa International Food and Wine Festival. USA: Wine Australia showcased Australian regional, diverse, premium wine to targeted consumers in the US through a combination of partnered events and exclusive educational and consumer events including Summer of Riesling in New York with leading American sommelier, Paul Grieco; Landry s Taste of Australia with Vic & Anthony s restaurant in New York; and Australia s Finest food and wine showcase with the Australian Consul General in Los Angeles. Canada: Wine Australia collaborated with the liquor boards and other partners on a number of consumer events including a Victorian-themed consumer event in Toronto called Melbourne Underground, which attracted over 400 consumers; and an Australia Day food and wine event for 280 Vancouver-based wine lovers. China: Partnering with the biggest online wine retailer Yesmywine.com, Wine Australia organised an online campaign for one month and hosted two offline VIP consumer tastings in Shanghai and Beijing with about 400 consumers attending. The tastings focused on Australia s key varieties and regions. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 19

20 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 20 Japan: A+ Australian Wine educators and trade specialists hosted a range of consumer-facing activities across Japan including the Gorgeous Australia dinner and promotion, featuring Australian fine wine and gourmet food at a leading hotel; a series of themed Australian wine dinners at an Italian restaurant in Tokyo; and consumer tutored dinners in Kanazawa, Ishikawa. UK, Ireland, Europe: New activities for consumer education were introduced including presenting an extensive array of wines at Christmas fairs through third parties led by notable wine writers and broadcasters (Three Wine Men and The Wine Gang) and tutored tastings across universities in the UK. Emerging markets: Wine Australia partnered with Study Adelaide and the National Wine Education Training Centre to deliver an educational tasting event targeting approximately 200 international students studying in Adelaide. The event aimed to help educate the students about the quality and diversity of Australian wine and encourage them to visit wine regions while studying in Australia. STRATEGY #2 Increased investment in the Visitor Program, targeting key influencers AOP actions Enhance the scope and range of international visits, with particular focus on key buyer and media visits for category review purposes to demonstrate that there is more to discover about Australian wine. Expand on-premise and influencer visits from in-market education programs, including One Day Wine Schools, SIP classes and A+ Australian Wine Schools. Continue to work closely with regional and state associations to portray a diverse regional story. Coordinate the marketing activities of the various national, state, regional bodies to ensure aligned resource allocation and net benefit outcomes. WINE AUSTRALIA S Activities The Visitor Program enables Wine Australia to provide wine influencers and gatekeepers from the major markets with a first-hand experience of Australian wines and wine regions. Wine Australia, in conjunction with industry partners, organises and hosts visits to Australian wine regions for international media and key trade representatives including buyers, wine educators, sommeliers, retailers and other influential wine personalities. Throughout the year, Wine Australia organised 24 itineraries and hosted 129 visitors including 39 from China, 32 from Australia, 30 from the UK, 13 from the USA, six from Japan, six from Canada, three from Continental Europe, one from Hong Kong and one from Singapore. Nineteen of the visitors were media, 10 were buyers and the remainder from across the demand chain, including wine educators and sommeliers. Major visits, hosted in partnership with regional wine associations as part of the Regional Visitor Program groups, included: Vintage 2013 from China (32 visitors) in April, AusSIE 2013 from UK/Europe/Ireland (20 Visitors) in April and the Sommelier Immersion Program 2013 from North America (20 visitors) in May. Additionally, for the first time ever, Wine Australia delivered a domestic visits program, with three major visits hosted in partnership with regional associations: the Australian Trade Immersion Program (TIP) 2013 (10 Visitors) and the Australian Sommelier Immersion Program 2013 (20 Visitors). Another highlight was hosting the Wine and Spirits Education Trust (WSET) Scholarship group of nine scholarship winners from key markets around the world, including Australia, and a WSET representative, who will incorporate the learnings into the WSET curriculum. Scholarship winners participated in an immersive visit around Australian wine regions including a series of themed Masterclasses, tastings and educational tours to vineyards and wineries. A key outcome of the alignment with regional wine associations and state wine bodies was the development and delivery of Wine Australia s Regional Visitor Program This included investment from 19 regions and four state governments totalling $394,995 to deliver the Regional Visitor Program visits. In addition to the cash investment, substantial in-kind support was generously provided by regional associations and individual producers through time, effort, wines and venues. STRATEGY #3 Display and promote a diverse portfolio through exclusive consumer events AOP actions Deliver programs and activities that target profitable growth opportunities in the Australian domestic market, USA and North East Asia region. Raise awareness of the quality, diversity and value of the Australian category targeting millennial audience events and activities, with a focus on online communities. Targeted retail promotions and activity to restore consumer demand for key varieties produced in Australia. Wine Australia s Activities Wine Australia continued to create new and innovative approaches to reach wine consumers and target growth

21 opportunities. Major new initiatives include: North America In the USA, Wine Australia successfully showcased Australian regional, diverse, premium wine to over 10,000 targeted consumers through a combination of partnered and exclusive events including: Summer of Riesling: exclusive consumer event with Paul Grieco at Terroir; Australian Riesling and pig roast in New York. LANDRY S Taste of Australia : exclusive event with 100 food and wine lovers at Vic & Anthony s restaurant in New York showcasing Australian wine, food, arts, music, travel. Food and Wine Classic: Wine Australia worked with Food and Wine to showcase Australian wine to 2,000 consumers at the annual weekend event in Aspen. Wine Riot Event Series: Wine Australia s tables and Australian section helped make Australian wine stand out at this large-scale event program targeted toward a millennial crowd in San Francisco, New York and Los Angeles. Over 2,000 consumers attended each event. In Canada, Wine Australia s focus on expanding relationships with the liquor boards was supported by a number of consumer events and promotions including: Ontario a Victorian-themed wine tasting for 400 Toronto consumers called Melbourne Underground. Wine Australia supported the LCBO Vintages New Discoveries Release with a consumer wine and food event for 400 people. Wine Australia created an Australia section at the Gourmet Food & Wine Expo, to provide exposure to the 10,000 expo attendees. British Columbia Wine Australia coordinated an Australia Day event for 280 Vancouver-based wine consumers. UK, Ireland, Europe In the UK, new consumer facing activities were introduced including presenting an extensive array of wines at Christmas fairs through third parties led by notable wine writers and broadcasters (Three Wine Men and The Wine Gang) and tutored tastings across Universities in the UK. A consumer-facing Twitter campaign was AussieWineUK, which attracted 3,000 UK-based followers in the opening six months. Asia In China, Wine Australia worked with the high end Food and Wine Magazine to host a consumer tasting in Beijing with over 150 of Food and Wine s VIP readers. The event generated a 12-page Australian wine story in the magazine s September edition, which featured 11 user-pays partners. Wine Australia also partnered with China s biggest online wine retailer Yesmywine.com, for a month-long online campaign. As part of the campaign, Wine Australia hosted two VIP consumer tastings in Shanghai and Beijing with about 400 consumers attending. The total sales value of the online promotion reached over AUD$63,000 with over 1,800 bottles sold, making the average price per bottle AUD$35. Australia Wine Australia coordinated Aussie Wine Month in April 2013, with approximately 130 events conducted across 35 regions, aimed at raising awareness of Australian wine, the regions that they come from and the people behind the wines. The event generated over 140 media mentions across print, radio, television and digital media to a broad audience across the country. Aussie Wine Month was launched at a gala event in Sydney at the Ivy Ballroom where over 700 consumers tasted wines from 35 regions with winemakers in attendance pouring their wines and telling their stories. The closing event for Aussie Wine Month was Wine Australia s Women in Wine event, held in partnership with Dan Murphy s, at Sydney s Overseas Passenger Terminal. This successful inaugural event attracted over 400 consumers and received positive feedback from attendees around the quality and diversity of activities, wines and winemakers which was very encouraging. Dan Murphy s was also an active partner during Aussie Wine Month with its national weekly newspaper advertisement and April Fine Wine Buyer s Guide devoted to Aussie Wine Month and Women in Wine. Australian Wine Overseas program The Australian Wine Overseas program (AWO) is coordinated by Wine Australia to provide Australian and foreign overseas diplomatic posts access to a wide range of Australian wines. This unique promotional channel is an opportunity to expose international audiences to the diversity of Australia s fine wine offering. During the year, 10,709 litres of Australian wine was exported through the AWO program with sales valued at $230,021. Of this, 68% of the wine was sent to Asian countries, where access to Australian wine through alternative channels can be limited. STRATEGY #4 Focus on new technologies to engage a greater and more targeted audience AOP actions Continue to enhance and update the A+ Australian WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 21

22 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 22 Wine website to facilitate conversation, interaction, and relationship building with trade, media and consumers. Leverage online community with strong social media engagement across all activities, and encourage online retail involvement. Ensure full integration of activities with the A+ Australian wine website. Deliver targeted trade education programs to build confidence and insights. Increase communication of in-market intelligence and insights to our stakeholders. Wine Australia s Activities Websites Wine Australia continued to build and engage the online Australian wine community and increase awareness of Australian wines, regions and in-market initiatives among consumers, trade, media and other stakeholders. As a part of this, Wine Australia upgraded its industry website www. wineaustralia.com, which was completed in October The new website boasts a host of new features that provide levy payers, partners and stakeholders with better access to wine sector information and Wine Australia s services, including shopping cart facilities for the purchase of Market Program user-pays activities and Winefacts reports for nonlevypayers. A key benefit of the change was simple and free access to all Winefacts products for Australian winegrape and export levy payers. Winefacts offers a comprehensive range of statistics, data, analysis and insights to assist business decision making within the Australian wine sector. As a result of transitioning the A+ Australian Wine brand into the overarching brand solely for educational programs, Wine Australia undertook a re-branding and simplification of all its online and social media platforms globally. This involved rebranding all the country versions of websites in Australia, Canada, China, Japan, Korea, UK/Europe and the United States from A+ Australian Wine branding to Wine Australia branding. A single, global A+ Australian Wine website was retained as the global hub for all of Wine Australia s education activities throughout the world. In the last year, Wine Australia s websites received a total of 358,176 visits, with more than 1,230,000 page views. The top countries for visits to the site (in order) were Australia, the US, Japan, China and the UK. Key improvements as a result of the launch of the new Wine Australia website included a 32% increase in the amount of time spent on the site per visit and a 94% increase in the number of pages viewed on the site per visit. This shows a significant improvement in the accessibility of content on the site. Visitors are spending more time on the site, and more importantly, finding the information they need. Wine Australia created a new website to drive communication and ticket sales for Savour Australia 2013 Australia s first global wine forum. The site features a ticket booking mechanism to an external ticket provider, video content and all details about the forum for its wide ranging audiences including Australian wine producers, the global wine trade and media. The website is the call to action for all communication about the forum. E-newsletters Wine Australia launched an updated version of the Wine Australia e-newsletter in 2013 and increased the frequency to monthly. The e-newsletter is distributed to a database of over 10,000, mainly Australian wine industry representatives. It is supported by regular e-newsletters issued by Wine Australia to key trade and media in overseas markets. The updated version uses an Campaign Manager, which allows complete in-house management of all Wine Australia campaigns in all markets around the world, providing greater flexibility and reducing costs. Social media Wine Australia s social media strategy continued to evolve through a two-pronged approach to firstly, promote Australian wine, regions and events to consumers, trade and media and secondly, to promote Wine Australia s initiatives to stakeholders and the wine sector. The aim of the strategy is to enable Wine Australia to continue its growth as a respected, vibrant and innovative member of the online wine community. Wine Australia aims to target audiences on appropriate platforms with engaging content. Throughout the year, Wine Australia continued to refine its social media strategy to: reach a greater audience of consumers, trade, media and stakeholders; ensure use of appropriate platforms to reach target audiences; promote Australian wine across a range of platforms; and complement the organisation s overall marketing and communications. Social media platform changes and updates include: Decommissioning Twitter account to focus engagement with English speaking trade, media, consumer and industry followers via a single global Twitter As at 30 June 2013, Wine Australia s Twitter had more than 14,000 followers, an increase of approximately 4,000 followers on the previous year; Decommissioning the A+ Australian Wine Facebook page

23 used globally by all Wine Australia offices to communicate with consumers, replacing it with the more consumer friendly Aussie Wine account to engage global wine consumers; Increasing the use of the photo sharing platform Instagram; Transitioning from social video platform Youtube to Vimeo, allowing higher quality videos and greater functionality. This channel was used to promote the Market Programs prospectus, highlight experiences of Visitor Program guests and highlight the Aussie Wine Month theme tune and events; Using Storify as a tool for showcasing the Visitor Program visits featuring photos, videos and updates from guests, wineries and hosts, which received positive feedback from the visitors involved in the trips and industry partners investing in them; Expanding Wine Australia s follower base on Chinese social media platform Weibo.com, attracting over 10, WINE SECTOR INTELLIGENCE OUTPUT: KEY MEASURE OF SUCCESS: followers a 400% increase compared to the previous year; Establishing a Korean Twitter account (@Wine Aust Korea) to reach media and trade in this emerging market and continuing to build the follower base for the Japanese Twitter account (@Wine Aust Japan); Establishing an Aussie Wine Facebook fan page in conjunction with Aussie Wine Month to enhance consumer engagement using evocative images and content. This has replaced the former A+ Wine account. The fan page attracted more than 5,100 followers in six months; Working in partnership with Tourism Australia on a Wines of Summer campaign to showcase 12 Australian wines alongside Australian places to enjoy them via the Australia fan page which has over 4.5 million followers. Further detailed information regarding key markets and our activities undertaken during the year in review is included in the Market Review section commencing on page 31. Support the competitiveness of the Australian wine sector through the collection, interpretation and dissemination of global wine sector intelligence. Increased use of information products and services RESULT: Wine Australia achieved this by making information products and services freely available to Australian wine producers, wine exporters and grape growers through the delivery of a new industry website. STRATEGY #1 Provide timely, fit-for-purpose, accessible and appropriately targeted information and analysis to stakeholders AOP actions Undertake continuous assessment and evaluation of foundation data sets with reference to industry requirements, alternative providers and sources and funding arrangements. Maintain the sector s relationship with the Australian Bureau of Statistics (ABS) to ensure the collection of key viticulture, wine grape crush, wine production, wine stocks and domestic wine sales data. Work to increase the sector s control and management of foundation data. Continue to review, refine and adapt information products and services to reflect and respond to industry needs. Wine Australia s Activities The Australian wine sector is widely credited with having world benchmark industry statistics. Wine Australia continued to assess and evaluate foundation datasets to support sector planning and decision making. These datasets cover both supply (viticulture, wine grape crush, wine grape purchase prices, wine production, wine inventories) and demand (domestic sales, exports and retail sales in key markets). However, the maintenance of all foundation data sets is under threat. As a result, Wine Australia is preparing a business case in support of the on-going collection of foundation data with the goal for the sector to have control and management of all foundation data sets. The sector s relationship with the ABS continued with the delivery of viticulture data for the 2012 harvest through the Vineyard Survey. This survey was funded by the GWRDC as part of the biannual funding agreement that has now expired. The ABS also delivered statistics on the 2012 winegrape WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 23

24 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW crush, wine production, wine inventories and domestic sales with Commonwealth Government funding support. The information products and services that Wine Australia delivers to the sector continue to be monitored and the feedback received has been positive. The Wine Information Dashboard remains a valuable industry tool and the snapshot reporting continues to meet the needs of busy stakeholders. Wine Australia actively sought feedback on whether the service is meeting the sector s information needs, including through a number of regional visits. Wine Australia prepared and published the annual Australian Winegrape Purchases Price Dispersion Report which has become a valuable source of price information. This was the sixth release in this line of publications. A secondary survey was undertaken in October 2012 to take into account the impact of post-vintage bonus payments. On the demand side, a range of global data was sourced during to assist in identifying trends in key markets. This data covered a broad range of sales performances and market factors influencing sales in Australia s major markets including the domestic market, the UK, the US, and Canada. The categories included volume and value, wine style, sales channel, price point and varietal. In addition, data on competitor activity was sourced and analysed. The export approvals database continues to be a key foundation data source. The Wine Export Approvals Report (WEAR) was released on a quarterly basis as well as a range of other associated reports such as the Export Market Snapshots on over 30 markets. Individual WEARs were prepared for several state and regional associations. In addition, special quarterly regional reports were prepared and delivered to five regional associations. Sales trends reports were delivered on a regular basis for the United Kingdom, the United States, Canada, Quebec, British Columbia, Sweden, Japan, China and Australia. These reports covered wine styles, price points and sales channels, in most cases by volume and value, of Australian sales compared to the total market. Regional and varietal snapshots provide insights into Australia s supply base. The reports were developed as comprehensive snapshots to provide industry with a better understanding of Australian regions and varietals in domestic and international markets. The snapshots include plantings and bearing area over time, wine grape production and yields, water application methods by region, top five varietals and weighted average prices, exports by regional label claim and top five export destinations. Regular domestic and import reports were prepared to monitor trends in the Australian market. With access to the most up-to-date Global Trade data, Wine Australia was able to provide timely information and analysis on the scale and dynamics of competitor producing countries. This is vital in an increasingly competitive operating environment. The Export Market Guides were regularly updated to monitor and communicate changes in the global wine regulatory and policy framework on a market-by-market basis. The export market guides are an essential reference point for Australian exporters and allied industries. The reports provide market information on the individual wine market size and scope, consumption trends and import analysis, Australia s positioning, duties and taxes, labelling regulations and other countryspecific import requirements, updated as market and trade conditions change. The Vintage in Review was released in June. This review collated vintage reports from over 50 regions. In addition, Wine Australia contributed significantly to Vintage 2013 presentations conducted by WFA and Wine Communicators of Australia (WCA). STRATEGY #2 Contribute to the resolution of sector-wide strategic issues and priorities AOP actions Develop strategic intelligence for the Australian wine sector to inform policy development and debate on key issues. Facilitate identification of priority areas. Define and communicate market opportunities for each price and channel segment for the Australian wine category. Wine Australia s Activities Wine Australia contributed to the WFA Expert Review through the provision of data and participating in presentations at WFA Board workshops. Key presentations were delivered on supply and demand balances by price segment as well as demand projections by market and price segment for the Australian wine category. The purpose of the expert review was to chart the changing dynamics in the wine industry and determine where future opportunities lie for Australian wine businesses. A strong evidential base was compiled for decision making by and for the industry. There was a specific focus on the opportunities for profitability and margin growth over the next five years. The project built on previous work, notably Directions to 2025, and the more recent Wine Restructuring Action Agenda. 24

25 Wine Australia led two GWRDC-funded projects to facilitate a better understanding of potential opportunities for the Australian wine category: Barriers in the United States trade for developing premium Australian wine sales. The opportunities for Australian wine in the online channel in the United Kingdom. The State of Play presentation continued to evolve as a key document to focus sector strategic issues and priorities and has been used in various forums such as investor information days and regional presentations. STRATEGY #3 Actively engage research communities and industry organisations in information-sharing and integrated relationships to leverage shared intelligence and processes for the benefit of the Australian wine sector AOP actions Operate as an inter-agency information hub to ensure industry is provided with required supply and demand intelligence. Make all information and statistics freely available to the Australian wine community to support improved decisionmaking. Seek ways to minimise the costs to the wine sector of data collection and reporting. Wine Australia s Activities Wine Australia s Wine Sector Intelligence (WSI) operates as the Australian wine sector s central provider of supply and demand intelligence to assist better decision making within the sector. The team responded to over 2,500 queries during the year in a timely and professional manner. Regular positive feedback from customers, both internal and external, was received throughout the year. WSI actively engaged with a range of research providers as well as national, state and regional organisations to share information. This included working closely with WFA on the provision of analysis and data to support their various initiatives. WSI continued to consult and collaborate with the other peak wine bodies as well as maintaining Wine Australia s membership of the National Wine Extension and Innovation Network to keep abreast of promotional opportunities. Closer links have been formed with regional associations in an effort to share intelligence and reduce duplication. Regional presentations were undertaken throughout the year. The new Wine Australia website was launched in October All information and statistics were made freely available to the Australian wine community in an effort to support improved decision making. This has resulted in dramatically improved accessibility of the products Wine Australia offers. Wine Sector Intelligence contributed significantly to Market Development s Market Programs Prospectus with the preparation of market summaries and the Ready Reckoner tool. STRATEGY #4 Optimise the dissemination and incorporation of Wine Australia-facilitated knowledge into Australian wine sector decision making AOP actions Wide promotion of the upgraded Wine Australia website to attract greater use of information products by customers. Investigate upgrading the online report builder tool or alternatives to make downloading data much easier. Undertake state, regional and company presentations and deliver industry journal content to foster greater adoption and utilisation of information products and services. Wine Australia s Activities Information products are delivered predominantly through Wine Australia s corporate website. The new website was developed in a short timeframe and was delivered in October The new website has been a success. Since launch through to June 30, the website received 171,487 visits and 975,684 page views. Winefacts received 125,468 page views and 7,500 products were downloaded. A substantial effort was devoted to promoting and communicating Wine Australia s information products and services through a wide range of avenues including: Regular notifications; Contributing articles to industry publications (at least 2 articles per month); Conducting regular promotional visits to regions in Victoria and South Australia; Developing industry networks through attendance of conferences, company visits, and regular phone calls; Making personal presentations to industry groups and companies and; Regular contributions to Wine Australia e-news. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 25

26 The investigation into the development of an improved report builder tool was delayed until to allow time for a review of the new website. Various presentations were made and regional promotional visits were conducted in the Barossa, Tasmania, Rutherglen, Geelong, Mornington Peninsula, Yarra Valley, Upper Goulburn/Strathbogie, and Sunbury. Twitter and Facebook are also being used to promote new product releases as well as the homepage of the website. 3. COMPLIANCE OUTPUT: To protect and enhance the international reputation of Australian wine. KEY MEASURE OF SUCCESS: The absence of any significant incidents that reflect adversely on the international reputation of Australian wine. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW RESULT: No incidents were identified that significantly damaged Australia s reputation for producing wines of quality and integrity. STRATEGY #1 Maintain a robust regulatory regime to protect and enhance Australia s reputation for producing wines that meet customers expectations for quality, safety and integrity AOP actions Develop and implement a replacement electronic export approval system. Devise and implement a system authorising accredited facilities to produce import certificates required by the European Union. Wine Australia s Activities Despite changes to the export control process introduced last year, Wine Australia has continued to operate with the existing electronic export approval system in order to minimise capital expenditure at this time. Wine Australia is, however, in the process of developing enhancements to the current approval system to improve service to industry ahead of considering a functional specification for a simplified replacement system for introduction in the future. Whilst the current export approval system remains operational Wine Australia is not in a position to delegate the production of European Union import certificates to third parties. Wine exporters are required to be licensed by Wine Australia. There were 2,201 licence holders in , a 2% decrease on the previous year. 46% of licences were held by wine producers while the remainder were held by non-producers. Following the 2011 review of export controls, Wine Australia, in consultation with WFA and WGGA, agreed that Wine Australia s regulatory activities should focus on an enhanced auditing and analysis program and the provision of regulatory advice. These services account for a significant proportion of the costs of the regulatory function and Wine Australia decided, in consultation with WFA and WGGA, that these costs should be recovered as part of the export licence fee. During the year, Wine Australia therefore increased the export license renewal fee from $242 to $700. In addition to the license fee, Wine Australia charges fees to meet the costs associated with administering product registrations and issuing export permits and import certificates. In accordance with the Wine Australia Corporation Act, sufficient compliance revenue is generated to cover the costs of delivering these services. A total of 12,004 products were registered with Wine Australia throughout the year, a 16% decline on the previous year. This decrease is a reflection of the elimination of expiry periods on the Continuing Approval Number. Consignments in excess of 100 litres require an export permit prior to shipment. 45,575 export permits were issued during the year, a 4% decline over the previous 12 months. Some country authorities or importers require additional certification endorsed by Wine Australia. Throughout the year, Wine Australia issued 35,367 European Union import documents, a 9% decline on the previous year. In addition, Wine Australia issued 6,369 import certificates for destination markets such as China, a 15.5% increase on the previous year. Bulk wine represents 54% of the total volume of wine exported from Australia. Wine Australia requires the bottler of the wine at the export destination to be certified in accordance with an internationally recognised quality management system. Throughout the year, 1,200 wine samples were collected and 26

27 submitted for analytical testing to ensure compliance with the Australia New Zealand Food Standards Code. Individual test results were reported to each wine producer and no samples were detected to be in breach of any Australian maximum residue limit. STRATEGY #2 Maintain an effective label integrity program to ensure confidence in the description and presentation of Australian wine AOP actions Train four new inspectors to audit compliance by producers and exporters with the requirements of the Label Integrity Program. Conduct 300 label integrity audits, scheduled both randomly and in areas of greatest risk. Contribute to the development of an Australian grapevine quality standard through participation in the steering committee established for that purpose. Wine Australia s Activities Vintage, variety and geographical indication claims are optional on wine labels but if such claims are made they must be capable of being substantiated. The Label Integrity Program provides the framework for ensuring these claims can be justified by mandating the making and retention of relevant records throughout the wine supply chain. Wine Australia administers compliance with the program by inspecting records made in support of label claims. Four auditors were recruited and fully trained in the administration of the Label Integrity Program via a comprehensive series of structured presentations and seminars, reinforced through regular team meetings. The auditors then conducted 419 audits split approximately equally between wine producers and wine exporters who trade in wine made by other entities. Observations made during audits resulted in the suspension of three export licences. Following corrective action undertaken by the non-compliant exporters, and subsequent review by Wine Australia, each licence was reinstated. In conjunction with various industry bodies Wine Australia developed a draft Australian Standard for grapevine propagating material that is designed to support the objectives of the Label Integrity Program by helping to protect Australia s reputation for truthfulness in varietal wine labelling. It is expected that the Standard will be published in the coming year. STRATEGY #3 Assist wine exporters to comply with domestic and international wine production and labelling requirements AOP actions Continue to review export market guides to ensure exporters are provided with timely and accurate regulatory information. Establish a system to provide formal advice on wine label requirements on a fee for service basis. Wine Australia s Activities Wine Australia publishes guides to the labelling, compositional, production and certification requirements of 36 key international wine markets. All of the guides were reviewed during the year. Significant changes were made to the guides for the European Union, India, United Arab Emirates, Canada, South Africa, Korea, Vietnam and Mexico. Many presentations were made to individual wine producers and to industry groups on their obuu ligations to comply with various international regulatory requirements. Audiences included the Chinese Wine Association of Australia; oenology students at the University of Adelaide and wineries and producers in the Barossa Valley, Mornington Peninsula, Yarra Valley, Geelong, Sunbury, Wangaratta, Goulburn Valley, Rutherglen and Tasmania. Presentations were also made to the Inter Winery Analysis Group, students at the University of South Australia and via a webinar hosted by the Australian Wine Research Institute. Responsibility for providing advice on wine labelling requirements was reallocated during the year to the compliance audit team. It was determined not to charge fees for this service but to continue to fund the activity from other compliance revenue. STRATEGY #4 Lead an effective and rapid response to any incident that could adversely affect the reputation of Australian wine AOP actions Review the Incident Response Plan to ensure it remains an effective tool to manage incidents that threaten the reputation of the Australian wine sector. Wine Australia s Activities The incident response plan was reviewed during the year. It was determined that two actions are necessary in order to ensure optimum performance. The first involves updating the database of industry contacts for use when eliciting further WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 27

28 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 28 information on reported incidents and when communicating measures taken in response to those incidents. It was determined that the most appropriate time to review this database is when the electronic export approval system is redeveloped. The second review outcome was to re-emphasise the need for the Corporation to be notified immediately when potentially critical incidents are identified since Wine Australia is the hub around which the industry s response is coordinated. STRATEGY #5 Assist the Australian Government to ensure the Wine Australia Corporation Act and Regulations continue to provide a robust, credible and comprehensive regulatory system AOP actions Continue to review the Wine Australia Corporation Act and Regulations to close any gaps that may undermine existing regulatory controls. Review the elements of Standard and determine whether an alternative legislative basis is feasible. 4. TRADE OUTPUT: KEY MEASURE OF SUCCESS: Improved market access for Australian wine exports. Strong and effective contribution to efforts to reduce tariff and technical barriers to the free trade of Australian wine in international markets RESULT: Wine Australia continued to focus on resolving specific trade impediments arising throughout the year whilst maintaining the long term strategy to avoid or minimise trade obstacles through a range of initiatives and the development of a number of international instruments designed to promote better access to wine markets. STRATEGY #1 Constructively engage in relevant international wine forums where Australian wine can benefit from collaborative international action on market access issues AOP actions Represent Australia at the APEC Wine Regulatory Forum with a view to enhancing regulatory coherence in the region. Contribute to work of the Organisation of Vine and Wine, FIVS and the World Wine Trade Group. Particular focus will be applied to work seeking to harmonise or apply mutual acceptance principles to international standards relating to winemaking practices or agricultural chemical usage. Wine Australia s Activities Two significant amendments to the Wine Australia Corporation Act were made during the year. The first reduced the record keeping burden on wholesalers and retailers who receive wine packaged for sale to a consumer, whilst maintaining an audit trail throughout the wine supply chain and the effectiveness of the Label Integrity Program. The second amended the definition of vintage to allow for more appropriate labelling of late harvested wines than would otherwise have been the case. Wine Australia and the Department of Agriculture, Fisheries and Forestry have considered amending the Wine Australia Corporation Act to incorporate the elements of Food Standard Government practice has been to move all food standards into the Australia New Zealand Food Standards Code hence the proposal to identify alternative legislative basis for this Standard requires further consideration by industry, Wine Australia and the Government. Participate in newly established industry trade reference group in order to ensure alignment of wine sector priorities with Wine Australia s activities. Wine Australia s Activities Wine Australia represented the Australian industry at the APEC Wine Regulatory Forum and made two presentations encouraging participants to consider wine to be a low risk import which should attract minimal testing and certification requirements. Funding from APEC for ongoing work in the Wine Regulatory Forum has been secured for the next five years and Wine Australia will continue to participate in a group that represents the global region with the greatest potential for growth in Australian wine consumption. Wine Australia maintained involvement with various

29 international wine sector bodies including FIVS, where Australia occupies the Chair of the technical advisory committee, and the World Wine Trade Group. During the year, the World Wine Trade Group completed its work on a wine labelling protocol to augment the earlier agreement on wine labelling. DAFF is a member of the Organisation of Vine and Wine (OIV) and has established a reference group which includes representatives from Wine Australia to provide advice on Australia s response to the various technical matters discussed at the OIV. This group met prior to each significant session of the OIV during the year. Wine Australia attended two meetings of the industry trade reference group throughout the year. This group was established to provide a forum for representatives of Australian wineries to inform industry bodies and relevant government officials of the technical problems they encounter in accessing international markets and to receive reports on progress towards liberalising trade in wine through various intergovernmental initiatives. STRATEGY #2 Provide informed analysis and support to Australian Government officials for negotiations to improve market access for Australian wine AOP actions Prepare submissions providing details of current market conditions, Australia s recent trade performance, an assessment of market potential and priority tariff and technical impediments, when embarking on new international negotiations. Wine Australia s Activities Throughout the year Wine Australia engaged constantly with DFAT officials in relation to the Trans Pacific Partnership (TPP) negotiations. The countries involved in these discussions include some of Australia s established wine markets, such as the USA, Japan and New Zealand in addition to emerging markets such as Mexico and Vietnam. The Free Trade Agreement between Australia and Malaysia entered into force during the year and included potential benefits for Australian wine exports following intensive engagement throughout the negotiations. Free Trade Agreement negotiations with Japan continued throughout the year and Wine Australia is hopeful that significant benefits will accrue for Australian wine once discussions conclude. Wine Australia also provided comments on various technical notifications to the World Trade Organisation from China, Mexico, Argentina, Columbia, Canada and Vietnam. Wine Australia also met with various Australian Ambassadors, High Commissioners and Consuls-General prior to their postings and during mid-term consultations in order to brief them on the issues facing Australian wine exports in their sphere of influence. Wine Australia representatives also accompanied Australian government officials to the meeting of the Joint Committee managing issues arising from the bilateral agreement with the European Union on trade in wine where a range of important wine trade issues were discussed. STRATEGY #3 Cultivate relationships with key alcoholic beverage regulatory agencies to maximise Australia s understanding of international regulatory requirements and minimise the potential for Australian product to be found in breach of those requirements AOP actions Implement the third round of reciprocal staff exchanges with the US Tax and Trade Bureau. Maintain regular contact with agencies in other key export markets, in particular the Wine Standards Branch of the UK Food Standards Agency, the TTB, the LCBO and AQSIQ in Beijing. Continue to provide leadership of the FIVS-ABRIDGE technical advisory committee. Wine Australia s Activities Wine Australia maintained its relationship with its US counterpart by hosting a visit to Australia by the Alcohol and Tobacco, Tax and Trade Bureau (TTB) where a Memorandum of Understanding was signed between the two organisations. Wine Australia representatives visited the Wine Standards Branch of the UK Food Standards Agency in order to discuss a number of issues that had confronted Australian wine exporters in that market. One matter was only resolved after consultation with the European Commission. Wine Australia hosted a delegation from the Chinese Ministry of Agriculture and used the occasion to emphasise how Australia s pesticide management regime rendered wine a low risk product. In conjunction with WFA and WGGA, Wine Australia representatives met with officials from various Chinese government departments to pursue the authorisation of a number of winemaking materials and agricultural chemicals in widespread use globally, but not currently registered in China. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 29

30 GEOGRAPHICAL INDICATIONS COMMITTEE The Geographical Indications Committee (GIC) is a statutory committee established under the Wine Australia Corporation Act to determine Australia s wine regions and localities. The GIC comprises Mr Dennis Mutton (Presiding Member), Mr Philip Laffer (Winemaker Nominated Representative) and Mr Brian Englefield (Wine Grape Grower Nominated Representative). Mr Bruce McDougall is the alternate winemaker representative and Mr Richard Dolan is the alternate wine grape grower representative. The GIC did not hold any meetings during the year. There are no GI applications currently under consideration. Wine Australia provides administrative assistance to the GIC, assistance and advice to GI applicants and responds to GI related enquiries. REGISTER OF PROTECTED GEOGRAPHICAL INDICATIONS AND OTHER TERMS In accordance with the Wine Australia Corporation Act, a Register of Protected Geographical Indications and Other Terms has been established. The Register may be inspected at Wine Australia s office during business hours and extracts are available on Wine Australia s website. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 30 FINANCIAL RESULTS The Corporation achieved an operating deficit of $0.519 million for , which was lower than the $0.8 million loss approved by the Minister for Finance and Deregulation in May Approximately 41% of the Corporation s revenue came from two industry levies the Wine Grape Levy, based on the previous year s wine grape production, and the Wine Export Charge, based on the FOB value of wine exports in the year ending 31 March. Wine Grape Levy revenue received during the year was $3.235 million as opposed to $3.293 million for the previous year. The Wine Export Charge revenue received in was $2.142 million, $117,000 less than the previous year s figure of $2.259 million. Industry contributions to the Corporation s overseas market programs was $1.744 million for This was an increase on the figure of $1.455 million. Revenue from regulatory fees decreased to $3.782 million (6%) in Total expenditure reduced from $14.3 million to $13.5 million. There was an increase in reported expenditure on employee benefits, however this was driven by a number of factors, including the impact of the establishment of independent offices in the USA and Canada, which resulted in Wine Australia staff being treated as employees from October These individuals were previously Austrade employees and therefore had been accounted for as contractors in previous years and these costs classified as Supplier payments. Other material impacts on employee benefits were the payment of redundancy costs on the restructuring of selected overseas offices and the accrual of at risk components of employee remuneration packages in There has also been a significant change in the balances of Other Payables and Other Non-Financial Assets compared to the previous year. This was predominantly due to income and expenditure incurred on Savour Australia 2013 and subscriptions to User Pay Programs pre balance date, being treated as unearned income and prepaid expenses as at 30 June. Cash holdings at 30 June 2012 totalled $1.655 million, down from $2.185 million at 30 June Full details of the Corporation s finances are included in the Financial Statements section of this report.

31 MARKET OVERVIEWS AUSTRALIA THE MARKET The Australian wine marketplace continues to be challenging with margin squeeze and market congestion prevalent. The off-trade is dominated by the duopoly who, along with evolving channels of distribution such as online and traditional retail, are more rigorous than ever in marketing wine to an increasingly price conscious and informed consumer. In the off-trade, Nielsen reported that Sauvignon Blanc still accounts for around 40% of the total white wine market with a large predominance of that coming from New Zealand. The latest data shows a slowing of the category and the last quarter showed that the category went into decline. Semillon Sauvignon Blanc sales represent around 16% of the total white wine market and remain flat. More encouraging, however, is that this category is dominated by domestic offerings. One in five bottles of white wine sold are Chardonnay which continues to display a stylistic evolution while sales at premium price points are exhibiting encouraging growth. Pinot Gris has shown growth of over 20% in the last year, albeit from a small base, and now constitutes around 5% of the total white wine market. In the red wine category, Shiraz holds around 30% of the market and has shown steady growth over the last year with particularly encouraging growth in all price points over $7. Cabernet and Cabernet blends account for slightly less in sales than Shiraz and sales remain flat. Pinot Noir represents 7% of the total red wine market and has slowed from its growth of 20% last year to just 6% this past year. According to Wine On Premise: Australia 2013, the on-trade is thriving and the competition for listings has never been more intense. The report goes on to say that roughly half of premium wine producer s opportunity is in the on-premise. Imports continued their growth at both on- and off-premise level. There has been evidence of resurgence in awareness of domestic wine at trade level with more on-trade establishments showcasing a broader selection of Australian wines by the glass and on their lists. WINE AUSTRALIA S ACTIVITIES In , Wine Australia s domestic activities were successfully activated at both a consumer and trade level. The key pillar of education was at the forefront of the activities and these were targeted at consumer and trade alike. Wine Australia activities look to heighten awareness of the rich diversity of wines from across the country with the resounding message of quality and regionality at the fore. Activities were designed to engage trade and consumers and to raise awareness of the wines, regions and personalities in their own backyard. EDUCATION AND ENGAGEMENT Trade and Consumers Aussie Wine Month was held in April 2013 with approximately 130 events conducted across 35 regions, aimed at raising awareness of Australian wine, the regions that they come from and the people behind the wines. This resulted in more than 140 media mentions across print, radio, television and electronic media to a broad audience across the country. Aussie Wine Month was launched at a gala event in Sydney at the Ivy Ballroom where over 700 consumers tasted wines from 35 regions with winemakers in attendance pouring their wine and telling their stories. The closing event for Aussie Wine Month was our Women in Wine event, held at Sydney s Overseas Passenger Terminal and attended by 400 consumers. Wine Australia partnered with Dan Murphy s to present this very successful inaugural event and the feedback from attendees around the quality and diversity of activities, wines and winemakers was very encouraging. Dan Murphy s was an active partner during Aussie Wine Month with their national weekly newspaper advertisement and their April Fine Wine Buyer s Guide devoted to Aussie Wine Month and Women in Wine. It was a very successful initial partnership that is hoped will continue in the future. Wine Australia partnered with Riedel at the Good Food and Wine Shows across Sydney, Melbourne and Perth conducting Australian Wine Masterclasses to a cumulative audience of approximately 2,000 consumers. The Masterclasses received excellent feedback from the attendees and have been applauded for their education around the regionality and diversity of Australian wine. Wine Australia conducted Masterclasses at the Noosa International Food and Wine Festival which focussed on matching varietals with food alternatives. A new initiative was launched in conjunction with Gourmet Traveller Wine during the year which saw Wine Australia sponsor an award in the annual Wine List of The Year Awards for Best Listing of Australian Wines. From the finalist pool WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 31

32 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 32 for this award, 20 sommeliers were selected to participate in the inaugural Sommelier Immersion Program. This program immersed the participants in a number of Australian wine regions and focussed on the region s wines and the people behind the wines. Wine Australia conducted the inaugural One Day Wine Schools for trade in Sydney and Melbourne during the year and the top 10 students from this program were taken on an immersion trip around the Australian wine regions. Other key trade alignment came from working closely with the Court of Master Sommeliers and the Wine and Spirit Education Trust (WSET) to ensure teaching content remained current. Wine Australia continued its scholarship with the WSET for a high achieving scholar from Australia. VISITOR PROGRAM There were a number of successful groups of domestic trade that undertook immersion programs across numerous regions as part of the Sommelier Immersion Program (SIP) and Trade ASIA CHINA THE MARKET China has been the fastest growing export market for Australian wine for the past several years. Wine Australia s Wine Export Approvals Report showed Australian bottled wine exports to China growing strongly, up 10% to 35 million litres. Value increased 18% $237.9 million and the average value of bottled exports grew 6.8% to A$6.66 per litre. Australia is currently the second largest bottled wine exporter to China with 15% market share by value and 13% by volume in the imported wine market. The Chinese demand for premium wine is evident with strong growth in the higher price segments. Sales above $10.00 per litre were the stand out, up 25% to 5 million litres. China consolidated its position as the biggest destination for Australian bottled exports above $7.50 per litre, ahead of Canada and the US. Furthermore, the average value of Australian bottled wine exports to China was above that recorded by France. Per capita wine consumption in China is only one-quarter of the world average at 0.8 litres annually. With China s vast and increasingly urbanised population, the continued expansion of the overall market can be expected. The challenge is to raise awareness about the quality of Australian wines especially compared to old world Immersion Program (TIP). The feedback from the program participants as well as the regions was highly positive and sign up for next year s SIP and TIP has been extremely encouraging. COMMUNICATION Aussie Wine Month garnered a large amount of media exposure in the lead up to and during the month of April. The event resulted in over 140 media mentions with exposure in national, state and regional newspapers, on national morning television as well as state and regional radio. In combination with the significant social media campaign that was conducted by Wine Australia via Twitter and Facebook, awareness of Aussie Wine Month was maximised. Wine Australia is working closely with bodies including Wine Communicators of Australia, Restaurant and Catering and Sommeliers Australia to ensure clear, consistent and informative messaging around the Australian wine industry. producers which are still perceived to produce premium wines. Consumers in first tier cities such as Beijing and Shanghai have more advanced wine knowledge than those in second tier cities and more opportunity to taste wines from all over the world. However, it is becoming more and more crucial to engage with consumers in second tier and even third tier cities in order to expand market share as these consumers command increasing disposable incomes and are eager to learn about wine. Educating trade, media and consumers is central to Wine Australia s strategy in China. The key strategies in the market include: targeted trade education programs to build a network of A+ Australian Wine specialists in China; participation in key trade shows and promotions to position Australian wine; and targeted PR and communications via traditional, online, mobile and social media platforms. EDUCATION AND ENGAGEMENT Trade Wine Australia s major initiatives for trade education and engagement in China include: A+ Australian Wine School: The school was launched in

33 mainland China in October 2011 and has become one of the most authoritative wine courses in the China market. The course was developed to provide up-to-date, authoritative information on Australian wines to Chinese consumer and trade audiences. It is delivered by professional wine educators in the local language in classes that vary in size from people. Throughout the year, Wine Australia certified and trained five additional A+ Australian Wine educators in mainland China to expand the educator group to 14 in total. By the end of June 2013, classes had been successfully delivered to over 3,400 students all over China. Student feedback has been positive, participants commenting that they had learned about the varieties, regions and history of Australian wine and how to select Australian wines and read labels. In general, the courses increased the participant s confidence to buy Australian wine. On the basis of ongoing interest from students, intermediate level 2 courses are being planned and are expected to launch in late Food and Hospitality China (FHC): Wine Australia organised an Australian national pavilion at FHC, one of the key food and spirits shows in China. Seven exhibitors attended the 60sqm pavilion to showcase the brand image of Australia to the trade and media. A group dinner was organised by Wine Australia to connect the exhibitors with some key media and educator contacts. Chengdu Sugar and Spirits Fair: Wine Australia organised an Australian national pavilion of 192sqm in Chengdu at China s longest established and most influential local food and wine show. Chengdu is one of the fast growing second tier cities in China. Throughout the three-and-a-half day fair, the Australian Pavilion attracted 13 exhibitors showcasing over 40 Australian brands. During the trade show, two A+ Wine School Level 1 classes were delivered to full houses by a qualified A+ educator. Several media interviews were arranged, focusing particularly on the current status of Australian wines, its future development and Wine Australia s plan for education. A networking dinner with 13 Australian exhibitors, nine media, three educators, and representatives from Austrade was held. Wine Australia plans to continue participating in this important trade show to raise awareness of Australian wine. Taste Discovery Roadshow, second tier cities: Working with Austrade and over 40 exhibitors, Wine Australia successfully delivered a three-city Taste Discovery Roadshow throughout second tier cities to showcase Australian wines to influential local trade and media. The event provided an important opportunity to reach influencers in the second tier markets. A+ Australian Wine Level 1 classes were delivered in each city before the grand tasting, attracting over 100 attendees to each class. Attendees found the classes extremely informative. The grand tastings in each city attracted over 300 attendees and received positive feedback from the wine companies that participated, particularly in terms of the calibre of attendees. Shiraz Masterclass: Working with Jeremy Oliver, Wine Australia organised a successful Shiraz Masterclass Roadshow in Beijing, Shanghai and Guangzhou. Over 300 guests including influential media, educators, on-trade and off-trade representatives and key corporate clients of Tourism Australia attended. 10 wines from key Australian regions were tasted in each city. The feedback from the audience was very positive including statements that the Masterclass had changed their views about Australian Shiraz as a diversified range of flavours including some more elegant styles. Taste Discovery Roadshow, first tier cities: Wine Australia held a Taste Discovery Roadshow in the first tier cities of Beijing, Shanghai and Guangzhou with over 600 key trade, media and VIP consumers in attendance. The event played an important role in educating key influencers about the quality of Australian wine. Consumer Food and Wine Magazine Editorial and Tasting: A 12-page Australian wine story was published in the September edition of the high-end Food and Wine Magazine covering 11 brands. A consumer tasting targeting Food and Wine VIP readers was subsequently held in Beijing with over 150 VIP readers in attendance. Yesmywine.com Consumer campaign: Partnering with the biggest online wine retailer Yesmywine.com, Wine Australia organised an online campaign for one month and hosted two offline VIP consumer tastings in Shanghai and Beijing with approximately 400 consumers attending. A wine class was held on the key varieties and regions of Australian wine. The total sales value of the online promotion reached over $63,000 with over 1800 bottles sold. VISITOR PROGRAM Wine Australia hosted four key visits from China to Australia in including: China Media Trip: Partnering with Tourism Australia, Wine Australia organised a media trip targeting three wine and three lifestyle media to visit South Australia and Western Australia during the annual Margaret River Gourmet Escape. The feedback from the visitors was very positive and subsequent media reports were delivered in some key WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 33

34 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 34 wine and lifestyle magazines and online portals in China. Vintage Trip 2013: A group of 32 influential guests including media, food and beverage representatives, off-trade customers and importers travelled to Australia for an eight day vintage trip. The group visited Great Southern, Barossa, McLaren Vale, Adelaide Hills, Clare Valley, Riverland, Coonawarra, Yarra Valley, Mornington Peninsula, Rutherglen, Orange, Hunter Valley and Tasmania. Most of the guests were first time visitors to Australia and commented on the diversity of Australian wines. All were impressed by what they experienced and the hospitality they received in Australia. Wine Australia will work with the participants to identify potential candidates for A+ Australian Wine Specialists. COMMUNICATION Wine Australia s communication activities focused on maintaining the online platforms for communicating with consumers and key influencers in China through the A+ Australian Wine website and social media. Highlights include: A+ Australian Wine Chinese website: Wine Australia launched a Chinese version of the A+ Australian Wine website. The website is aimed at the Chinese trade, media and wine lovers who want to learn more about Australian wine including the regions and varieties. It will play a major role in communicating with and educating the Chinese market. Weibo.com: As a key social media platform, Wine Australia attracted over 10,000 followers by end of June 2013, a four fold increase compared with the previous year. This platform will be further developed in the coming year to expand the number of followers and more actively engage with them. E-newsletter: Wine Australia China delivered a bimonthly e-newsletter in English and Chinese to stakeholders and key Chinese contacts. This proved to be a good tool in keeping the industry and customers informed of the market and Wine Australia s activities. Media: another highlight of the year was the involvement of a local PR company who helped Wine Australia actively engage key wine and lifestyle media and contributed stories for publication each month. The total number of media stories and clippings about Australian wine reached over 160. JAPAN THE MARKET According to Euromonitor, Japan s total wine market, including both imports and domestic wine, was 294 million litres in Japan is Asia s second largest wine market after China and is now nearly half the size of the Australian wine market. According to the Japanese trade publication WANDS, the still wine market in Japan amounted to million cases in 2012, of which million cases were imported. The imported wine category grew by 19.6% during the year. In the same period, Australian still wine imports to Japan increased by 12.3% whilst competitors including Spain registered a 55.1% increase, Chile 34.3%, Argentina 27.8%, Italy 23.9, France 19.5% and USA up 15.8%. Whilst the current state of the Japanese wine market is clearly not depressed, it is one that is yet to be fully realised for Australian wine which is ranked sixth with a 4.57% market share, after France, Italy, Chile, Spain and USA. With the market in a deflationary trend for the past two decades, the Japanese have become accustomed to top quality offered at low prices. Despite the recent changes in Government monetary and fiscal policies (so-called Abenomics after the current Japanese Prime Minister Shinzo Abe), up-trading in consumables is gradual at best. Consequently, many mass retailers and chain izakayas (gastro pubs) still consider one-coin (i.e., 500 yen or A$5.50) private branded wine, often of Chilean or Spanish origin, and gabunomi (guzzling wine) as important components of their business. With the high cost of production in the Australian wine sector and the Yen having recently depreciated about 30% against the Australian Dollar, Australian wine has difficulty competing in the lower and mass end of the Japanese market spectrum. However, should the Abenomics policy succeed in boosting the real economy and consumer sentiment, opportunities should present themselves to premiumise the wine offering by all key countries of origin, including Australia. With the continuing depreciation of the Yen, the overall pricing of imported wines is expected to rise in late Accordingly, it is imperative to lift the common and out-dated perception of Australian wine to create a solid position and high expectations of Australia s premium and regional wine offer in the minds of the target Japanese trade and consumers. This should be achieved not only through continuous wine education and promotion but also through efforts, in partnership with our allied organisations, to create a new image for Australia the country, given the image of contemporary Australia is, in most cases, still blurred. Along with the British and the Americans, the Japanese are considered amongst the most advanced and discerning consumers in the world. The country s wine lovers are very well trained and intellectually curious. As the second largest wine market in Asia, Japan has great

35 potential to become a serious destination for Australia s premium and regional wines as the level of general interest and knowledge of wine advances amongst consumers and trade alike. The sector must ensure that their engagement remains strong, ongoing and patient, and that its message is smart, polished, culturally relevant, and convincing in order to win the hearts of the Japanese consumer. Wine Australia Activities Wine Australia s strategic priorities are to facilitate quality Australian wine education through certified specialist educators; creating communities of pro-australian trade and media; and to accurately and positively portray the images and lifestyle of modern Australia as a background to the fine wine offer. EDUCATION AND ENGAGEMENT Trade Wine Australia s major initiatives for trade education and engagement in Japan include: A+ Australian Wine Specialist program: Wine Australia renewed its commitment to the A+ Australian Wine Specialist program in Japan which has grown in its second year to become a community of 20 trade, 11 honorary and four Educator specialists, who are the official torchbearers for Australian wine across the key regions of Japan. The A+ Specialists cooperated with Wine Australia in formal events and also conducted their own Australian wine education and promotion in their fields of work and geographies. The Specialists attended the annual A+ Specialist VIP Reception at the Australian Embassy in Tokyo in April. The A+ Specialist group also gathered twice in Tokyo for day-long brainstorming sessions where they discussed the opportunities and future of Australian wine in Japan. A+ Australian Wine School: The Asia-wide A+ Australian Wine School educational platform supported 12 Level 1 Introduction to Australian Wine courses in Japan which reached more than 300 students at various wine schools in Tokyo and Osaka, taught by the 4 A+ Specialist Educators. Level 2 Intermediate course contents have been translated into Japanese and a number of other Asian languages. Wine Australia Tasting 2012: The annual Wine Australia Tasting drew a crowd of nearly 500 trade and media guests at Tokyo s Cerulean Tower Tokyu Hotel in September. The theme for 2012 was wines from Victoria which showcased a range of wines with great diversity from across the state. The annual tastings serve the Australian wine importer community as a business forum and a vehicle to drive autumn wine sales. Landmark Australia Masterclass: In conjunction with the Wine Australia Tasting, Michael Hill-Smith MW (Shaw + Smith) led a Landmark Australia Masterclass attended by some of Japan s most influential wine commentators such as Ned Goodwin MW and Katsuyuki Tanaka. Mr Hill-Smith showcased the classic and modern examples of Shiraz in Australia and stimulated the thinking about the diversity of Australian Shiraz which is still often considered in rather generic terms. The Masterclass was broadcast live and recorded via UStream. JSA Regional Chapter Roadshow: Wine Australia continued to work closely with the Japan Sommelier Association (JSA) which is the critical gatekeeper of fine wine and Japan s well-established sommelier culture. The JSA s three local chapters in South Kyushu, the Greater Nagoya and the Greater Osaka/Kyoto regions held a special Rediscover Australian wine seminar in October The JSA Regional Chapter Roadshow, supported by veteran wine writer and Asian market specialist Denis Gastin, provided an essential updated education on Australian wine for nearly 300 JSA members in three cities. Australian Wine for Japanese Palate: In the spirit of working with influential sommeliers, Wine Australia commissioned Satoru Mori, the L Association de la Sommellerie Internationale s (ASI) Best Sommelier of Asia-Oceania 2012, to present to some of Tokyo s leading Japanese chefs and wine writers on matching select Australian wine with delicate Japanese flavours. The special Australian Wine for Japanese Palate tasting experience at the Conrad Tokyo proved to be eye-opening, particularly for professional chefs in attendance, generating interest in the Australian wines shown. Collaborative activities: Wine Australia actively pursued collaborative opportunities with allied organisations to further the education and promotion of Australian wine. Examples include the management of Victoria s Independent Winemakers media luncheon at the Tokyo American Club (a joint project with the Victorian State Business Office Tokyo) and the assistance provided to the leading liquor wholesaler staff training on Australian wine hosted by Austrade Japan. Consumer In the absence of a large-format consumer wine tasting, a number of A+ Educators and Trade Specialists hosted a range of consumer-facing activities across Japan. Some of the activities included the Gorgeous Australia dinner and promotion featuring Australian fine wine and gourmet food at a leading hotel in Asahikawa, Hokkaido; a series of themed Australian wine dinners at an Italian restaurant in Tokyo; and consumer tutored dinners in Kanazawa, Ishikawa Prefecture. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 35

36 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 36 In conjunction with Austrade Tokyo, special Australian wine seminars and tasting experiences were conducted by A+ Educators targeting affluent consumers introduced by institutions such as Mizuho private bank and Mitsubishi Estate. VISITOR PROGRAM The key program for the year was the visit to Australia by the Level 2 A+ Trade Specialists. The specialists had passed a rigorous selection process testing their knowledge of and strategic viewpoints for the future of Australian wine. The five selected delegates visited the A+ Specialist Program Foundation Partner wineries and their respective wine regions, namely the Barossa, McLaren Vale, Coonawarra and Yarra Valley. Their hands-on experience, along with the many photographs taken during the visit, will help them conduct a number of Australian wine events and promotions in Wine Australia also arranged and accompanied the visit by Winart magazine s contributing wine writer, Yasuko Nagoshi, to explore Victoria s wine regions. The interviews and tasting experiences captured during the visit will be featured in the Winart magazine over two issues later in COMMUNICATION Media The most remarkable media success in Japan during 2012 was the serialised feature in the Wine Kingdom magazine on each of the Australian winemaking states. Each of the UK/IRELAND/EUROPE UNITED KINGDOM THE MARKET The wine market needs to be seen in the context of the total economy which is moving from recession to established austerity with perhaps a glimmer of optimism. The UK may finally be emerging from the economic doldrums with the Office for National Statistics reporting higher than expected growth of 0.6% in the last quarter of compared to 0.3% in the previous quarter. On the back of this report, consumer confidence rose to its highest level in more than three years according to GfK National Opinion Polls as Britons optimism about the economic outlook improved. Even the Chancellor of the Exchequer, George Osborne, took to his phone to tweet GDP stats better than forecast. Britain s holding its nerve, we re sticking to our plan, the economy s on the mend. But still a long way to go. The Organisation for Economic Cooperation and Development series included comments by some of Japan s most celebrated sommeliers including Makoto Abe and Toshifumi Nakamoto (JSA directors), Nobuhide Tani (Japan s Best Sommelier 2011) and Kazushige Tashima, the sommelier for Prince Hotels and Wine Australia s own A+ Trade Specialist. This feature was read widely by wine professionals nationwide. Wine Australia also worked with the popular gourmet and lifestyle publication, Cuisine Magazine, on a special feature portraying the relaxed lifestyle of an Aussie-style beach house complemented by multi-cultural food and Australian summer wines. With the A+ Specialist Educator Minoru Numata as a guide, this episode appropriately conveyed the message that Australia is a relaxed yet excellence-pursuing, cosmopolitan nation of good food and wine, promoting the enjoyment of wine as part of a relaxed Japanese lifestyle. All leading wine and liquor trade publications including WANDS, The Shuhan News, Vinotheque, Winart, the Shurui Inryo Nippo featured various Australian wine topics, Wine Australia initiatives and events in Australia during the year. Wine Australia boasts one of the most active and oldest social networking programs in the Japanese wine trade, actively posting on both Facebook and Twitter about Australian wine trivia, featured wines and engaging in chats in the Japanese language. Twitter followers number 3,445 while the Japanese version of the Wine Australia s Facebook page attracts 1,318 likers. (OECD) echoed this in its statement that recovery would continue to strengthen for the rest of the year. The OECD said the UK s growth was firming after a rise in its composite index from in February to in June. A reading of 100 indicates the country is running at its expected growth rate in the economic cycle. As the world s biggest importer and sixth-largest consumer of wine, the UK market remains significant, due in part to its role as a window into the world of wine with some 35,000 SKUs on its shelves. Whilst consumption is declining, Australia is outperforming the market in the off-sales sector which grew by 18.8% overall throughout the year compared with 25% growth for Australia. The 9 10 sector increased 15.6% overall and 18% for Australia, albeit off a low base (Nielson, April 2013). Grocers are moving away from the deep-discounting that has dominated promotional activities of the last decade, in line with new regulations from the Office of Fair Trading which stipulate avoidance of any artificial price inflation that enhance

37 subsequent discount, as well as ensuring that any promotions run for a maximum time to match that at which the product was sold at its full price. In November 2012, Aldi, Co-Op, Lidl, Marks & Spencer, Morrisons, Sainsbury s, Tesco and Waitrose all agreed to adopt a new code of practice set out by the regulator. The volume of wine sold on promotion in the UK off-trade fell by 6% in the last 12 months to June this year. The retailers are growing their own private and exclusive label in the marketplace which presents both challenges and opportunities to suppliers. The decision by the reigning political party to shelf the introduction of Minimum Unit Pricing was warmly greeted by the wine trade, although the duty escalator remained in place. Australia has four of the top 10 brands in UK: Hardys at number one, McGuigan, Jacob s Creek and Wolf Blass. These brands, along with other Australian market leaders, continue to innovate and provide consumer interest at accessible price points. Total still wine sales in the UK off-trade market increased 1% by volume to 89 million cases and value increased to 5.4 billion, largely driven by increase in prices through duty escalator. Australian suppliers are exiting lower price segments and total volumes have accordingly declined. Despite the declining volumes, Australia remains number one by volume with a 19.7% share and a value share of 19.9%. Italy, which had been enjoying stellar growth, went into double-digit decline in the last quarter, while New Zealand lost the most market share (Wine and Spirit Trade Association, Q2 2013). At the same time, Argentina, South Africa and Spain all enjoyed significant growth. In the on-trade wine category, France and Italy continue to lead the market with Australia in third place by both volume and value. Australia performs well in the café and gastro-pub scene whilst still struggling for visibility in the more traditional white cloth dining sector. The UK branded restaurant market is set to grow by 5.6 billion in the next five years according to Project Restaurant 2013 (Allegra Strategies, May 2013). The report echoes many that predict consumers eating out habits will be less structured and more informal, leading to growth in restaurants with capacity to trade all day. Wine Australia Activities This is the second year of Wine Australia s new marketing plan in the UK which seeks to meet the twin-needs of recapturing the excitement around mass-tige Australian wine (RRP ) and building awareness to help drive category growth in fine wine at price points above this. The program pivots off three platforms predicated upon informing and inspiring the trade, the media and consumers: Educate through tastings; Engage through key relationship management, events and trade visits to Australia; and Energise across the category through positive and robust communications and dissemination of market intelligence. EDUCATION AND ENGAGEMENT Trade and Consumer The One-Day Wine School was further developed throughout the year with cameo roles for visiting winemakers and a regional Roadshow taking the school beyond Australia House in London, to Manchester, Leeds and Glasgow. A series of nine varietally or stylistically themed Masterclasses were hosted, each featuring mini-verticals and all prefaced with a free-pour tasting that allowed greater exposure to the sector under discussion. This program culminated in a Landmark Tour Day of Masterclasses and a separate free-pour tasting of more than 100 wines on the subject of The wine that inspired me as determined by those in the trade who had visited Australia in the past few years. This latter tasting was particularly well reviewed and will now be an annual event. Also new to the program was the launch of the Tasting Blind Club which brings together each month a group of targeted wine trade professionals to test themselves and enjoy debate on the collection of wines that includes benchmark examples from around the world. The best taster of the year wins a trip to Australia. A channel-focussed Australian category trade and press tasting in January saw more than 600 wines selected by distributors and producers for their portfolio collections to be presented to the independent retailer and on-trade. New activities were introduced for consumer reach including presenting an extensive array of wines at Christmas Fairs through third parties led by notable wine writers and broadcasters (Three Wine Men and The Wine Gang) and tutored tastings across Universities in the UK. Once again, Wine Australia sponsored the UK Young Wine Writer of the Year Award in conjunction with the Circle of Wine Writers, in a commitment to continuing the tradition of creative feature writing. Many one-to-one tastings with key press and trade were hosted at the company offices in the Strand at Australia House, which celebrated the 100th anniversary of the laying of the foundation stone this year. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 37

38 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 38 VISITOR PROGRAM More than 40 wine trade and press visited Australia from the UK, Ireland and Europe in , including a group of over 20 led by Wine Australia staff in two parallel tours which began with a wine tasting on a yacht in Sydney Harbour and then on to Hunter Valley, Orange, Mornington Peninsula, Rutherglen and the Yarra before moving on to South Australia and Western Australia. COMMUNICATION Traditional print and broadcast media as well as online activity was utilised to distribute Wine Australia e-news with video links to trade activities, blogs and details of forthcoming events. A consumer-facing twitter campaign was developed AussieWineUK which saw 3,000 followers in the opening six months. This trial is still being evaluated. IRELAND THE MARKET The recession continues to bite in Ireland and the drinks industry has been hit badly by exponential rises in duty. The overnight introduction of a further 1 tax increase on a bottle of wine in December 2012 shook an already nervous industry which is looking at further job losses and fears of a return to cross-border shopping. Total employment in the drinks industry has been nearly halved by the recession to 60,000 with pubs and bars suffering a 35% sales decline. Grocers dominate the retail scene in which research group Kantar estimate Tesco as the biggest player with a 27.6% market share, followed by Musgrave (when SuperValu and Superquinn are combined) at 24.9% and Dunnes Stores at 21.5%. The German discount stores Lidl and Aldi have 14.4% between them, with the latter now the fastest growing supermarket in Ireland. Price driven promotions are commonplace and in combination with margin-squeeze many producers and independent off-licences are struggling to survive in this market. The buoyant Irish are nonetheless rallying around Australia with McGuigan now the number one brand, having ousted Blossom Hill from that spot earlier this year. WINE AUSTRALIA S ACTIVITIES In Ireland, activity has centred on education for the trade and consumer, both of which provide a platform for engaging insights into the wines, the regions and the producers. A series of Masterclasses saw leading winemakers talking to key influencers, whilst the Sommelier Immersion Program again took a targeted group from the on-trade through a six-session course covering the diversity of Australian wine. To contribute to The Gathering celebrations running across Ireland, Wine Australia joined the Dublin Bay Wine Festival hosting a tasting stand throughout the weekend and also presenting a tutored tasting on the Saturday entitled It s a long way from Clare to Here The wines of the Clare Valley. At the high profile Ballymaloe Literary Festival, Wine Australia hosted tastings on the themes of Riesling to be Cheerful and Rewards of Patience. As the majority of wine consumed in Ireland is purchased by those in the age bracket, these festivals provided direct outreach to core consumers. A category tasting for the trade was the penultimate activity of the year, taking place in Dublin and incorporating two further Masterclasses led by wine writers and broadcasters, Mary Dowey and Martin Moran MW. The closing event of the year was a Masterclass on 24 Chardonnays from across Australia presented by Chief Winemaker for Jacob s Creek, Bernard Hickin, followed by a consumer tasting. EUROPE THE MARKET Whilst Mario Draghi, head of the European Central Bank, remains committed to do whatever it takes to save the single currency, the Eurozone nonetheless remains mired in recession. Output declined by 0.2% in the first three months of 2013 for the sixth consecutive quarter from a slump that started in late Forecasts from the European Commission in May 2013 showed annual Eurozone GDP shrinking by 0.4% in 2013, following a contraction of 0.6% in Germany remains stable whilst the southern European countries of Spain, Greece and Cyprus battle chronic unemployment and poor outlook. The Baltic states continue to shine. Within the 28 nation European Union, Latvia will become the 18th member of the Eurozone next January which may prove a positive addition with their GDP forecast growth currently at 3.8%. Continental Europe imports some 90 million litres of Australian wine for which the primary markets are Germany, Netherlands and Denmark, followed by Belgium, Sweden, Switzerland, Finland and Norway. Exports to Scandinavia were down overall in the year ending June 2013 as an increase in exports to Denmark were offset by declines in Sweden, Finland and Norway. Germany and Belgium also saw declining imports on Australian wine. With nine out of 10 Scandinavian adults describing themselves as regular wine consumers (Wine Intelligence, August 2012), the Nordic market is ahead of the UK, Germany and even France and Spain in terms of penetration of the wine category. The monopolies of Systembologet in Sweden, Alko in Finland and Vinmonopolet in Norway heavily feature bag-in-box with sales of the category now at 52% in Sweden but growth in

39 premium bottled wine offers further opportunity. To that end, an annual Nordic tasting has been initiated by Wine Australia. Australian wine in Germany is currently led by Shiraz, with the Barossa and McLaren Vale showing largest market share by region of origin, but the diversity of German imports is growing. The Netherlands has a younger demography of wine drinker than many European countries and seems very open to innovation. All central and northern European countries are very ecologically aware which can be a negative for Australia which is seen as a country that incurs heavy food miles. The emerging markets of Poland and Russia are showing much potential with substantial growth in Australian wine imports in the last year. WINE AUSTRALIA S ACTIVITIES In Stockholm in October 2012, Wine Australia hosted an inaugural tri-way tasting with the Nordic monopoly buyers and the local hotel, restaurant and catering (HoReCa) trade and media with the objective of opening discussion to improve the breadth and diversity represented across the monopolies and HoReCa; to develop a stronger demand for Australia s regional wines and to promote growth at higher value price points. This is a dialogue that must be maintained. The advent of online distribution this year in the monopoly States following an EU ruling is opening a further channel of distribution. Wine Australia aims to work with Australian producers and agents to maximise the potential in this sector and are looking forward to an even greater breadth of tasting in September NORTH AMERICA UNITED STATES OF AMERICA THE MARKET Premium trends continue in the US market. The premium price segments continued to outpace all other segments in , albeit from a smaller base. Symphony Information Resources Inc (IRI) reported premium table wines driving growth for the category with wines over $8 growing at 11.2%; the $15-$19.99 category growing at 9%; while wines above $20 continue to show the most dramatic growth of any price segment at 15%. Red blends and Moscato continued their hot streak with increases of 23.1% and 27.4% respectively. Domestic USA varietals showed strong growth in Chardonnay at 6.6% and Cabernet Sauvignon at 8.3%. Imported wines were driven by two varietals: Sauvignon Blanc at 18.3%, and Malbec at 15.8% growth. Domestic wines account for 74% volume and 79% of the value 2013 when 250 wines will be under review through this tri-way exercise which will now be an annual occurrence. At ProWein in Germany in March 2013, Wine Australia hosted a stand for producers that was three times the size of the preceding year with 28 exhibiting wineries plus a program of generic tastings and hospitality amidst the many meetings. It was a dynamic three days with tailored PR and communications driven by local in-market specialist support and Wine Australia s own generic program which involved loop videos on plasma screens and pro-active trade and media outreach. More than 44,000 trade visitors came to Düsseldorf from across relevant wine import markets. Buyers from Scandinavia and the BeNeLux countries plus Russia and Poland, southern Europe and the UK were at ProWein as were trade from USA, Vietnam, China and Singapore. The international wholesale, retail and specialist trade once again accounted for the largest group of visitors, followed by restaurant and hotel trade. Over 70% of visitors held management positions. Wine Australia anticipates having a significant presence at the show again in VISITOR PROGRAM Wine Australia s overseas visitor program this year included hosting a number of key influencers from across continental Europe. A major highlight for the coming year will be Savour Australia in September 2013 where trade and press from Europe will be in attendance for the three day conference and tastings in Adelaide and subsequent regional vineyard tours. of the US wine market. Total wine imports represent just under 30% of the market. In the year to October 2012, imported wine increased by 5% to 1.2 billion litres valued at US$5 billion. The United States has been Australia s second biggest export market in volume, behind the United Kingdom, for the last 15 years and Australia maintains a significant market share in the US. Australia holds 18% of the import market share by volume and ranks second, after Italy. The US remains Australia s number one export destination by value. In the past year, the US industry has expressed excitement about Australia s new offerings, regional emphasis, refreshed sets, market adaptations, and wide-scale industry collaboration. Australian exports to the USA declined by 0.6% to 190 million litres in The decline was driven by a 1.2% decrease in bulk shipments to 73 million litres while bottled wine shipments were flat at 117 million litres. The average value of WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 39

40 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 40 both bottled (down 2.5% to $3.25 per litre) and bulk (down 6.7% to $0.92 per litre) declined. Total value decreased 3% to $448 million. Positive growth at the premium end continued with a 15% increase in the above $7.50 per litre segment to 4 million litres. The $7.50-$9.99 per litre segment in particular grew 41% in the year, the first increase in this category for Australian wine in over two years. US sales statistics indicate Australia sits in a steady growth stage for premium and regional wines. Symphony IRI sales data shows that Australian wine has been growing at the $15 $19.99 price point for the past 10 quarters, however, this is off of a modest market share. The same report quoted Australian wine sales in the USA at USD$600+ million in value in the year to May WINE AUSTRALIA S APPROACH The Wine Australia program for the US market aims to deliver overarching visibility and strong regional, diversity and premium cues for the Australian category. This is delivered via a comprehensive program concentrating on each of these four areas: PR/communications, trade education, consumer and trade events, and retail/restaurant promotions. Throughout Wine Australia USA made significant efforts to increase category visibility, increase confidence among stakeholders and leverage the growing trade and press interest in Australia s premium, regional and diverse offering. Wine Australia has developed critical partnership programs with Tourism Australia, state trade and tourism bodies, GWRDC, G Day USA and Australian Embassy and Consular teams in the US. Wine Australia continues to adapt its programs, models and activities to best capitalise on opportunities for wineries in this market. EDUCATION AND ENGAGEMENT Trade Wine Australia USA s trade education efforts in were centred on engaging on-premise influencers, retailers and educators. Wine Australia and The Guild of Sommeliers continued their partnership via a dedicated Australian seminar series across five US cities in Hosted by Mark Davidson and a panel of Guild of Sommeliers speakers, the seminars attracted strong attendance in each city and engaged just over 230 members of the trade. This partnership will continue in The Sommelier Immersion Program continued through the year but was scaled down to two cities: Chicago and New York. All sessions were full and the groups were engaged. The Sommelier Immersion Program commenced four years ago as a grassroots education platform to enhance the perception of premium Australian wine and instil excitement amongst the US trade. This six-part education program continues to be adapted with a targeted one day intensive program being rolled out in to enhance the program s PR outreach and ensure more retail and media attendance along with on-premise and education influencers. The program s success has extended beyond its original education goals and continues to engage members of the trade, generate hundreds of listings, multiple restaurant events and promotions, and inspired staff support. The Aussie Wine Down Series was a new program created to stay engaged with SIP attendees with dedicated themed tastings. A Riesling focus tasting was held in San Francisco and a Shiraz focus walk-around tasting was held in New York. Two large scale walk-around trade and media events themed The Next Chapter were staged in 2013 with record attendance of over 250 visitors and two booked-out seminars in San Francisco and over 150 visitors in New York. Excellent media coverage of The Next Chapter events and the Wine Australia effort continued from January through July Three research projects were completed in early 2013 as a direct engagement with trade and other stakeholders: 1. GWRDC/Wine Australia combined study delivered by Wine Opinions titled US Trade & Distributor Perceptions of Australian Wine. 2. Sommelier Perspectives: Wine Australia report on themes and trends from four years of the Sommelier Immersion Program based on essays and feedback. 3. US Importer Survey: Wine Australia redeveloped and conducted the US importer survey, a new annual importer outreach effort to view trends. Consumer Wine Australia successfully showcased Australian regional, diverse and premium wine to over 10,000 targeted consumers in the US through a combination of partnered events and exclusive events. Highlights include: Summer of Riesling NYC: exclusive consumer event with Paul Grieco at Terroir; Australian Riesling and pig roast. Cochon 500 BBQ Memphis: Wine Australia conducted seminars & grand tastings over the weekend event. Landry s Taste of Australia NYC: exclusive event with Vic & Anthony s restaurant showcasing Aussie wine, food, arts, music and travel to 100 attendees. Australia s Finest LA: exclusive Aussie event with the Consul General of LA, Chef s Inc and Wine Australia at the Consul General s residence. The event showcased four Aussie celeb chefs and food paired with wines to an audience of over 150 people and Los Angeles television/ network.

41 Food and Wine Classic Aspen: Wine Australia participated in this annual weekend food and wine event which attracted almost 2,000 attendees with two exclusive trade events and the Aussie Recovery Breakfast. Wine Riot: Wine Australia tables and an Australian section helped to stand out from the crowd in this large scale event targeted toward a millennial crowd in San Francisco, New York and Los Angeles. Attendance reached 2,000 for each event. Embassy Events DC: Wine Australia worked with the Australian Embassy in Washington DC for four events targeted at showcasing Australia s regional wines to Defence Department and Agricultural Affairs Department stakeholders along with the annual Open Embassy Day consumer cultural event. VISITOR PROGRAM The Visitor Program remains a critical component of Wine Australia USA s program with significant benefit to its education, perception and engagement goals. The main visit was the SIP Trip Immersion Program in May 2013 for 10 attendees of the Program. The attendees were selected for their industry education reach and influence. Wine Australia partnered with Tourism Australia and South Australian Tourism Commission to host Senior Wine Editor, Joe Czerwinski, of the Wine Enthusiast Magazine. Czerwinski visited Victoria, South Australia and Western Australia. COMMUNICATION Wine Australia USA s communications strategy continued to target wine business press and instil excitement in Australia s efforts at premium and regional messaging. Market intelligence was utilised to demonstrate growth points and highlight the market programs to generate attention. Wine Australia USA rolled out a new PR campaign in called The Next Chapter, aimed at strengthening the positive messaging to trade and industry gatekeepers. The Next Chapter is a collective term to engage press, trade, stakeholders and distributors to encourage them to take a fresh look at Australia today with particular emphasis on diversity, regionality and discovery. Wine Australia USA published a blog post titled What is the Next Chapter and provided press and industry with a Next Chapter Market Update in January Two Next Chapter trade and media events were held in January in San Francisco and April in New York. Next Chapter press releases were published and a sample mail-out was distributed to press in secondary markets. A Next Chapter press recap tool for distributors and importers was created to highlight the media buzz. Some of the media results include: Huffington Post Australian Wine: Rebooting a Brand January New York Times Australia s Best Reds Trickling to the US February Wine Spectator.com An Australian Turnaround? 17 January. Chicago Tribune Smaller Australia 30 January. Wine & Spirits Sydney s Wine Scene February 2013 Cover & Feature. Rick Bakas blog Australia s Next Chapter of Shiraz/Syrah 17 January. Slow Living Radio Australian Winemakers Take America by Storm! January Shanken News Daily Australian Wine in New Effort to Diversify and Move Upscale 7 March. Tasting Panel Magazine Welcome Back (by Deborah Parker Wong) March Issue. Washington Post Restraint Re-emerges from Australian Wines 6 March. Shanken s Impact Newsletter Aussie Wine s Evolution Makes Upscale Effort 28 March. iwineradio interview with Wine Australia s Angela Slade, 8 March. Wine & Spirits Daily A New Chapter for Australian Wines April Market Watch Australia s Challenge: The wine category from Down Under looks to recover by focusing on regions and premiumization May Tasting Panel Magazine new Aussie energy/rebound & Savour article, June & July Wine Spectator Australian Wine Report Australia On the Move August Wine Australia continued its strong focus on stakeholder communications throughout the year with 11 program member updates, two importer group meetings and regular individual importer and winery meetings on the east and west coasts. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 41

42 WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 42 CANADA THE MARKET Canada is Australia s third largest export destination by volume with 49 million litres exported to the market in The wine market in Canada was valued at over CAD $9.8 billion in 2011 and more than 478 million litres of wine was consumed. Approximately 85% of the Canadian wine market is imported. In total volume, Australia is the number four imported wine in Canada, after France, Italy and USA. According to Euromonitor International, the wine sector grew more than 8% by volume in 2011 and 5% in value terms. Most notable was that it was the higher price points that pushed growth the furthest. This trend is seen also in Australian export data. Despite reports of category decline, the growth opportunities continue to exist for Australia at the higher price points. In particular, the AUD $10-$15 per litre segment displayed volume growth of 5% to 1.2 million litres in Canadian wine consumption trends continue to show increased demand for both domestic and imported wines. Between 2007 and 2011, wine consumption in Canada increased 14.5%. According to the VINEXPO market study, this growth should continue at the same pace up to This is an average annual increase of 3% which is three times that of overall world wine consumption growth. Canada is forecast to be the fifth fastest growing wine market worldwide, behind China, USA, Russia and Germany. WINE AUSTRALIA S APPROACH The Wine Australia program for the Canadian market aims to deliver overarching visibility and strong regional, diversity and premium cues for the Australian category. Results are delivered via a comprehensive program in each of the following four areas: PR, trade education, consumer events, and Liquor Board collaborative promotions. Through , Wine Australia Canada made significant efforts to increase category visibility and to engage with Liquor Boards for promotions, events, and identifying opportunities. The Wine Australia Canada team continues to adapt its programs, model and activities to best capitalise on opportunities for wineries in this market. Going forward, the Wine Australia team will focus its efforts on working with the top liquor boards in British Columbia, Ontario and Quebec to analyse the category challenges and opportunities and to work collaboratively to build three to five year strategic plans to revive the Australian category via program investment, new consumer public relations efforts (in partnership with Tourism Australia and Australian Government partners) and increased education. EDUCATION AND ENGAGEMENT Trade and Consumers Wine Australia s trade engagement efforts in were centred on building relationships and programs with the Liquor Boards in Ontario, British Columbia, New Brunswick and Nova Scotia. The key activities are outlined below: Ontario Wine Australia worked to support the Liquor Control Board of Ontario s (LCBO) Vintages release calendar with a combination of staff training, trade and media activities and consumer events. The main events included the support of a Victorian-focused LCBO Vintages A Release in July 2012 with a training session for 22 product consultants and a trade and media Masterclass for 60 attendees. Wine Australia also supported LCBO s Vintages New Discoveries Release in October 2012 with a consumer wine and food event for 400 people. The Wine Australia team successfully engaged Toronto wine consumers with a large Victorian-themed consumer event, called Melbourne Underground, in partnership with local event marketing company, iyellow. Melbourne Underground attracted over 400 consumers. Wine Australia created an Australia section at the November 2012 Gourmet Food & Wine Expo to provide large-scale exposure to the 10,000 expo attendees. In January 2013, Wine Australia hosted its first Sommelier Immersion Program to 30 of Toronto s top sommeliers and media. The one-day program followed the themes of varietal flights to showcase Australia s regional, diverse and premium offering. Wine Australia selected participants for an immersion trip to Australia in May The participants included Anne Martin, Head Sommelier of Maple Leaf Sports + Entertainment; Wendy Votto, Wine Director/Lead Sommelier of Via Allegro Ristorante; and Peter Boyd, Wine Director for Scaramouche Restaurant. New Brunswick Australia is the number three wine category in New Brunswick and represents 13% of Alcool NB Liquor s (ANBL) total wine volume. Wine Australia partnered with ANBL to develop a plan to refresh their portfolio and engage more consumers in the Aussie wine category. October 2012 was Australia month across all ANBL stores, the first large-scale country promotion taken on by the liquor board. 15 new General List and 32 Specialty products were released in October for the Bring Australia Home campaign. Overall, the Australian category saw a 36.7% dollar lift (over October 2011). Although the <$15 price bracket represents more than half of the total dollars spent in the Australian category, the over $20

43 price bracket almost doubled during the promotional month. British Columbia & Alberta The Wine Australia program in British Columbia was consistently active through with a combination of independent retail staff training, liquor board thematics and engagement and consumer events. In August 2012, staff training was delivered to the Legacy Liquor Store group to support their Summer of Riesling promotion which included an event for over 200 attendees. Wine Australia hosted a British Columbia Liquor Distribution Branch (BCLDB) product consultant training in the lead up to the September 2012 Australian thematic. 100 stores participated in the Super Thematic covering 32 products and 11 New Product Releases. Nine In-Store Tastings were held. Highlights from this event included: A 50% increase in counter sales of participating Australian products in the 100 thematic stores; A 41% increase in counter sales of thematic products over the previous month in all stores and 15% over the same period the year before; A 30% increase in category sales over the previous period in all stores and 25% over the same period the year before; and A 34% increase in the total Australian category in all BCLDB stores. The BCLDB ran a Bring Australia Home super thematic in late June 2013 which will run through to July The Australian thematic will be run again in the month of July rather than September for the foreseeable future. The Australia Day consumer event was held in January 2013 in conjunction with the House Wine Event marketing company for 280 Vancouver-based wine consumers. The Vancouver Playhouse International Wine Festival was held in February-March with 18 Australian wineries participating. Two trade sessions were conducted with over 1,500 participants in each. Other events included the Alberta Winefest in Edmonton and the Calgary Trade Shows where 450 trade members participated in two trade sessions. The Australian Masterclass in Calgary attracted 25 members of media and trade. VISITOR PROGRAM The Visitor Program remains a critical component of the Canadian program with significant benefit for the education, perception and engagement goals. The main visits in included the Nova Scotia Liquor Board in October 2012 (for the lead up to the February 2013 Australian thematic) and the SIP Trip Immersion Program in May 2013 for 10 members of the trade, three of whom were from Ontario. COMMUNICATION The communications strategy in renewed its focus on critical wine media in Canada with themed wine lunches, wine seminars and the first-ever one-day SIP program. Stakeholder communications were consistent throughout the year with 11 Program Updates. Collective agent meetings were renewed late in Toronto and Vancouver. WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 43

44 EMERGING MARKETS WINE AUSTRALIA CORPORATION ANNUAL REPORT YEAR IN REVIEW 44 THE MARKET Emerging markets cover a broad range of countries across the Asia Pacific, Central and South America, Russia, Eastern Europe, Middle East and Africa. Many of the emerging markets share similarities in both opportunities and challenges. Most markets have a relatively small market for grape wine, however, the upside of a low per capita consumption means there is potential for growth, particularly as consumers move from beer and spirits to wine. This is particularly common across the Asia Pacific region where consumers view wine as a more sophisticated and lower alcohol beverage alternative. Across many of these markets, particularly Asia, there is a tendency towards red wine mainly due to the positive health benefits associated with the consumption of this style of wine. This coincides with a growing, new middle class with a higher disposable income and a thirst for knowledge about international brands and products. The younger generation and women are also proving to be a powerful and growing consumer group across emerging markets. Common challenges across emerging markets include: moderate to significant import duties and local taxes which impact retail prices; moderate to high on-premise mark-ups; fragmented distribution and consumer access to wine; limited knowledge of wine; government legislation restricting alcohol sales; and cultural and religious issues, which impact upon acceptance of wine in the community. Globally, the Asia Pacific region continues to be the fastest growing region for wine sales. Australia has a strong competitive advantage in Asia given our close geographic proximity, shared time zone and close cultural linkages with the region. Wine Australia continues to prioritise the markets of Singapore, Hong Kong and South Korea through close engagement with media and trade. Vietnam shows promising signs of an embryonic market. Brazil, India and Russia are also a focus through working at government level to reduce and remove barriers to entry. Wine Australia Activities Trade Wine Australia has actively supported engagement between the Australian wine sector and emerging markets through participation in trade fairs including the Hong Kong International Wine and Spirits Fair, through facilitation of sales opportunities, connecting buyers with appropriately matched wine companies, and through securing more than 50 prospective buyers from across Asia to meet with Australian wine companies at Savour Australia Education A+ Australian Wine School Asia: The A+ Australian Wine School was developed to provide an education and training program about Australian wine across Asia, ensuring a greater awareness and appreciation of the diverse range of Australian wines on offer. In the emerging markets, the certified A+ Australian Wine One Day School is currently operational across Singapore, South Korea, India, and most recently in Mexico. The schools deliver programs in the local language throughout the course of the year. Consumer Each year, Wine Australia partners with Study Adelaide and the National Wine Education Training Centre to deliver an educational tasting event targeting approximately 200 international students studying in Adelaide. For many, it is their first encounter with wine and for some it is the beginning of a journey of discovery into the world of wine. Media Wine Australia has successfully attracted key media from across emerging markets including Mexico, Russia, Brazil, Singapore, India and Hong Kong to participate in Savour Australia Wine Australia continues to support media requests for statistics, information and imagery representing the Australian wine industry for media requests across Emerging Markets. VISITOR PROGRAM Wine Australia s Scholarship program awarded by the Wine and Spirit Education Trust (WSET) offers winners a hosted visit across Australian wine regions. Guests in included: Ms Amanda Parker, General Manager: The Fine Wine Centre at Berry Bros & Rudd (Hong Kong); and Mr Seah Wei Lien (William), Area Manager: Wine Trade Asia Pty Ltd (Singapore).

45 The Organisation board 46 COMMITTEES 48 ENABLING LEGISLATION 50 ACCOUNTABILITY 50 CORPORATE GOVERNANCE 51 PEOPLE 53 WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 45

46 BOARD WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 46 The Members of Wine Australia (the Board) are accountable to the Minister for Agriculture, Fisheries and Forestry (the Minister) and through the Minister to Parliament, for the operations of the Corporation. The Board is responsible for Wine Australia s overall strategic direction and directs its functions and the achievement of its objectives by a process of policy decisions. Board composition Wine Australia comprises eight non-executive members appointed by the Minister; a Chairman, and seven members. Members are nominated for appointment by the Wine Australia Selection Committee which comprises members nominated by the Winemakers Federation. The criteria for selection to the Wine Australia Board includes expertise in winemaking, grape growing, marketing, finance, business management and administration or government policy processes and public administration. The members terms of appointment expire on 30 April 2014, except for the Chairman, whose term expires on 30 June Members remuneration is determined by the Remuneration Tribunal pursuant to the Remuneration Tribunal Act MEMBERS OF WINE AUSTRALIA BOARD The Members of Wine Australia at the date of this report are: MR GEORGE WAHBY (CHAIRMAN) Appointed 1 July 2012 George Wahby has been an active member of the Australian wine industry since He was formerly the Chief Executive Officer and Director of McWilliam s Wines Group Ltd, stepping down in George was also a Director and Vice President of the Winemakers Federation of Australia, Chairman of Winemakers Federation of Australia s Medium Winemakers Membership Committee, a Director of the Liquor Merchants Association of Australia (LMAA), Australia s First Families of Wine (AFFW) and sat on Wine Australia s Market Development Advisory Committee. George has completed numerous courses including; the General Management course at Harvard Business School in the United States; a Bachelor of Business (Accounting/Business Law) degree at the University of Technology Sydney; and the Wine Executive Program at Monash University. He is also qualified as a Certified Practicing Accountant (CPA), Chartered Secretary (ICSA) and is a graduate member of the Institute of Company Directors Course (GAICD). George previously worked for large multi-nationals, Philips and Bristol Myers Squibb, within the financial and commercial disciplines. Mr Wahby is the non-executive Chairman of Wine Australia MR KEVIN MCLINTOCK (DEPUTY CHAIRMAN) Appointed 15 May 2008 Reappointed 11 May 2011 A graduate of Harvard Business School with 36 years experience in the international wine industry, Kevin was Chief Executive Officer of McWilliam s Wines from 1993 until his retirement from executive service in December He remained on the McWilliam s board as Deputy Chairman from 2005 to He was a member of the Executive Council of the Winemakers Federation of Australia from 1994 to 2008 and elected President of the Medium Winemakers Forum. In 2006/07 he chaired the industry taskforce that produced the strategy Wine Australia: Directions to He was awarded the 2009 Len Evans Award for leadership. Mr McLintock is a non-executive Member of Wine Australia. DR TONY JORDAN Appointed 15 May 2008 Reappointed 11 May 2011 Tony Jordan, through his own company Oenotec Pty Ltd, consults on winemaking, viticulture and wine business to wine companies in Australia, New Zealand, Europe, China and India. Tony graduated with Honors from Sydney University and then completed a PhD in Chemical Physics which then led to an early career in Research Science, a Lectureship in Wine Chemistry and then Oenology at Charles Sturt University (where he was involved in establishing the Wine Science course) and later managing partner in Oenotec, a worldwide winemaking/viticulture consultancy. He started his current role with Oenotec in mid-2008 after 21 years with the Moët Hennessy group. He joined Moët Hennessy in 1987 as Managing Director/Winemaker for Domaine Chandon Australia, a role that was expanded to consulting winemaker to the Chandon wineries worldwide in the 1990 s. He was appointed as CEO of Domaine Chandon Australia, Cape Mentelle and Cloudy Bay NZ in Tony has investments in vineyards in SA, Tasmania and Victoria and sits on the boards of two wine companies. Tony is a past President of the Yarra Valley Wine Growers Association and the Australian Society of Viticulture and Oenology.

47 He has judged over the last 25 years at all national and most regional wine shows in Australia, as well as the Decanter Awards in the UK, the Trophy Wine Show in South Africa, Winpac, the Hong Kong International Wine Competition and the Easter Show in New Zealand. He has been Chairman of the Royal Hobart Wine Show, the Perth Royal Wine Show and the Hong Kong International Wine Competition. In his spare time Tony looks after his small Yarra Valley vineyard. Dr Jordan is a non-executive Member of Wine Australia MS JOSEPHINE ROZMAN Appointed 15 May 2008 Reappointed 11 May 2011 Josephine Rozman is a Chartered Accountant and a graduate of the Australian Institute of Company Directors, with over 20 years of wine sales, marketing and management experience in both domestic and international markets. After working for Pricewaterhouse in Sydney and San Francisco, she partnered in the establishment of a successful business pioneering Australian wine brands in the United States, brands subsequently sold to Mildara Blass. She then established a wine-industry bio-technology company in the United States, worked as Asia Pacific Marketing Director for a multi-national fast moving consumer goods company and as Chief Executive Officer of Blue Pyrenees Estate. She is currently an independent marketing consultant to Australian and international wine companies on marketing and distribution strategies and export planning. Ms Rozman is a non-executive Member of Wine Australia. She chairs both the Wine Sector Intelligence Advisory Committee and the Audit and Finance Committee. MS KATE THOMPSON Appointed 15 May 2008 Reappointed 11 May 2011 Kate Thompson is the Legal and Corporate Affairs Director of Premium Wine Brands, the owner of several wine businesses including Orlando Wines, with responsibility for legal matters, public affairs and corporate social responsibility. Prior to this she worked in private practice at Piper Alderman and Fisher Jeffries lawyers. She has extensive experience in all transactional aspects of the wine industry as well as compliance matters and intellectual property protection. Kate is a current Board member of the Winemakers Federation of Australia and of Drinkwise Australia. Ms Thompson is a non-executive Member of Wine Australia. She chairs the Legislation Review Committee and is a member of the Audit and Finance Committee. MS SUE HENDERSON Appointed 11 May 2011 Sue Henderson has 28 years experience in the wine, liquor and beverage industries, working in Australia and in the wine export markets of the United Kingdom, Europe, USA, Canada, China, Korea, Japan and New Zealand. Sue is highly skilled in both sales and marketing and has negotiated many significant supply and distribution contracts for both wine and beer in the global markets. Sue has spent much of her career developing and implementing marketing and business plans. She has consulted to Australian and New Zealand wine companies since 2006 and has participated in Board roles for Grant Burge and Prince Hill Wines. Most recently Sue has undertaken a two year project as Commercial Director for Ara Wines of New Zealand building global distribution. Ms Henderson is a non-executive Member of Wine Australia. Mr Bill MOULARADELLIS Appointed 11 May 2011 Bill Moularadellis is a Roseworthy Oenology graduate who has had a lifelong involvement in the wine industry. He is the founder and Managing Director of Kingston Estates Wines and has extensive hands-on experience in viticulture, winemaking and local and international sales. Under his stewardship Kingston Estate has grown to become one of Australia s largest family-owned wine companies and produces in excess of five per cent of Australia s total wine production. He is a past executive committee member of the South Australian Wine Industry Association and has previously been Chairman, and is a current board member, of the Riverland Wine Industry Development Council. From 1997 to 2002 he was a member of the Business Advisory Board to the Reserve Bank of Australia. Mr Moularadellis is a member of both the Audit and Finance Comittee and the Wine Sector Intelligence Advisory Committee and is a non-executive Member of Wine Australia. Mr Brian WALSH Appointed 11 May 2011 Brian Walsh is a Wine Industry consultant. He retired in December 2012 after a 24 year career at Yalumba, spanning roles of Chief Winemaker, Director of Production and Director of Strategy & Business Development. This was preceded by 20 years working in winemaking and management positions in McLaren Vale. Brian has a long history of wine industry service, having been President of the South Australian Wine Industry Association, Chair of the South Australian Wine Tourism Advisory Board and Chair of Barossa Winemakers Committee. He currently WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 47

48 chairs the Wine Innovation Cluster at the Waite Campus, Urrbrae and is Independent Chair of Riverland Wine. A senior wine judge in Australia over the last 30 years, Brian has been both Chairman of Judges at the Royal Adelaide Wine Show and Chair of its Wine Committee. Mr Walsh is a non-executive Member of Wine Australia. MANAGEMENT Responsibility for the day-to-day conduct of the business is delegated to the Chief Executive, Andrew Cheesman, who was appointed by the Board and is accountable to the Board for ensuring their decisions are translated into actions by the management team. The management team is selected by the Chief Executive, in consultation with the Chairman if appropriate, on the basis of experience and expertise. Meetings of members The Board met formally on six occasions during the year. Members attendance at meetings is shown on page 49. COMMITTEES WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 48 Audit and Finance Committee The Audit and Finance Committee, comprising three Members of Wine Australia, assists Members in determining whether: their actions comply with the Wine Australia Corporation Act and other relevant acts; the accounting records are appropriately maintained; there are adequate internal controls to safeguard the assets of Wine Australia; the strategic planning documents and budgets have been satisfactorily compiled; the Financial Statements and management reports give a true and fair view; and there are reasonable grounds to believe that Wine Australia can pay its debts when they fall due. The Audit and Finance Committee has direct contact with management and the auditor, creating a line of communication between the Members and the auditor, and enabling a clear and objective assessment to be made of the accuracy and quality of accounting policies, records, reports and internal control procedures. Remuneration Committee The objective of the Remuneration Committee is to advise the Board and oversee the establishment of appropriate remuneration policies and strategies that provides the Corporation with the capability to achieve its short and long term business objectives. The Committee s responsibilities include: 1. Reviewing and recommending to the Board for approval the remuneration for the Chief Executive; 2. Providing guidance to the Chief Executive regarding the remuneration for Senior Managers; and 3. Ensuring the annual achievement review process is in accordance with the People and Operations Manual. Other committees Committees comprising Members and industry and government representatives play a key role in the decision making process. Apart from the Audit and Finance Committee and Remuneration Committee, the Board has also established the following committees: Wine Sector Intelligence Advisory Committee provides guidance on the information and analysis undertaken by Wine Australia. Legislation Review Committee ensures that the Wine Australia Corporation Act and Regulations provide an effective framework for regulating the Australian wine sector. Each committee has terms of reference and the Board periodically reviews the ongoing role and membership of its committees. Wine Australia also works with industry, government agencies and other stakeholders through ad-hoc working and reference groups as required. For example, several Marketing Reference groups are consulted as necessary. In this way, Wine Australia ensures that it develops and implements strategies that are relevant to a cross section of interests within its stakeholders. Membership of Wine Australia s committees, and committee members attendance at meetings held during the year, is shown on page 49. Wine Australia thanks the members of these committees for their contribution throughout the year.

49 BOARD AND COMMITTEE MEMBERSHIP AND ATTENDANCE AT MEETINGS BOARD Attended Held* George Wahby (Chairman) 6 6 Kevin McLintock (Deputy Chairman) 6 6 Tony Jordan 5 6 Josephine Rozman 5 6 Kate Thompson 5 6 Sue Henderson 6 6 Brian Walsh 6 6 Bill Moularadellis 6 6 AUDIT AND FINANCE COMMITTEE Josephine Rozman (Chair) 4 4 Bill Moulardellis 4 4 Kate Thompson 4 4 Remuneration Committee George Wahby 1 1 Kevin McLintock 1 1 WINE SECTOR INTELLIGENCE ADVISORY COMMITTEE* Josephine Rozman (Chair) 0 0 Andrew Cheesman 0 0 Brenton Fry 0 0 Darren De Bortoli 0 0 Lawrie Stanford 0 0 Stuart McNab 0 0 Bill Moularadellis 0 0 Andrew Pirie 0 0 Anthony Quinn 0 0 John Power 0 0 Kate Harvey 0 0 Tony Battaglene 0 0 LEGISLATION REVIEW COMMITTEE** Kate Thompson (Chair) 0 0 Tony Battaglene 0 0 Owen Malone 0 0 James Omond 0 0 John Power 0 0 Will Taylor 0 0 Flora Sarris 0 0 WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION * No meetings were held for the Wine Sector Intelligence Advisory Committee in as it was not required. ** The Legislation Review Committee only meets when needed to consider proposed changes to the Wine Australia Corporation Act and Regulations. No such proposals occurred in that required a meeting of the Committee. 49

50 ENABLING LEGISLATION WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 50 Wine Australia is established under the Wine Australia Corporation Act 1980 (the Act). Objects The objects of the Act are: to promote and control the export of grape products from Australia; to promote and control the sale and distribution, after export, of Australian grape products; to promote trade and commerce in grape products among the States, between States and Territories and within the Territories; to improve the production of grape products, and encourage the consumption of grape products, in the Territories; and to enable Australia to fulfil its obligations under prescribed wine-trading agreements. ACCOUNTABILITY Responsible Minister Wine Australia is responsible to the Minister for Agriculture, Fisheries and Forestry. During the year in review, Senator the Hon. Joe Ludwig was the Minister for Agriculture, Fisheries and Forestry. As at the date of this report, the Hon. Joel Fitzgibbon was the Minister for Agriculture, Fisheries and Forestry. Ministerial directions The Wine Australia Act provides that the Minister may give direction to Wine Australia with respect to the performance of its functions and the exercise of its powers. No such direction was given in the period under review. Under the Commonwealth Authorities and Companies Act, 1997 (the CAC Act ), the Minister, and the Minister for Finance and Deregulation, may issue directions to the Board, and the Minister may notify the Board of any general Australian Government policies that apply to Wine Australia. At the date of this report, the following notifications have been received: In July 1998, the Minister issued a directive in accordance with Section 16(1)(b) of the CAC Act requiring the Corporation to comply with the reporting requirements of the Guidelines on Funding of Consultation Costs by Primary Industry and Energy Portfolio Statutory Authorities. Functions of Wine Australia Wine Australia s functions are: to promote and control the export of grape products from Australia; to encourage and promote the consumption and sale of grape products both in Australia and overseas; to improve the production of grape products in Australia; to conduct, arrange for, and assist in, research relating to the marketing of grape products; and such other fgunctions in connection with grape products as are conferred on the Corporation by the Act or the regulations. Powers of Wine Australia The Act gives Wine Australia the power to do all things necessary to be done in connection with the performance of its functions. In December 2006, the Minister for Finance and Administration issued a directive in accordance with Section 16(1)(c) of the CAC Act requiring Wine Australia to provide annual Compliance Reports on legislative compliance and financial sustainability. The Minister has notified Wine Australia under Section 28 of the CAC Act that the following policies apply to Wine Australia: On 21 August 2002, Commonwealth Fraud Control Guidelines 2011 (replacing Commonwealth Fraud Control Guidelines 2002). On 8 November 2005, Australian Government Property Ownership Framework. On 24 January 2007, Protective Security Policy Framework (replacing Protective Security Manual 2005). Consultation payments to industry organisations Wine Australia has a formal relationship with the Winemakers Federation of Australia the peak industry organisation representing Australian winemakers. Consultation payments totalling $191,076 were paid to WFA during the financial year in regard to a range of matters including technical issues,

51 industry leadership courses, health and social responsibility activities, vine health and biosecurity issues and environmental activities States in August 2012 known as Wine Australia USA, LLC and incorporated a Not-for-profit-Corporation in Canada in October 2012 known as Wine Australia Canada. Audit Wine Australia s Financial Statements are independently audited by the Australian National Audit Office (ANAO) in accordance with ANAO Auditing Standards. Significant events During , Wine Australia terminated its Administrative Arrangements Agreement with Austrade in North America ahead of establishing a presence in its own right in the United States and Canada. In accordance with legal advice, Wine Australia established a limited liability company in the United CORPORATE GOVERNANCE Statement on Governance Wine Australia s Corporate Governance Statement sets out the governance framework that is designed to ensure Wine Australia fulfils its functions with efficiency and integrity. Board Members are bound by a Code of Conduct and policies have been adopted providing for an annual review of their performance and establishing their right to access independent professional advice if required. Policies and Procedures Wine Australia s People and Operations Manual is available to the Board and all staff members and outlines Wine Australia s policies and procedures; roles and responsibilities of staff members, the Board and its committees; Board delegations; and the Code of Conduct. Client Service Charter Services are provided to the wine sector and wine sector information is provided to the public. Wine Australia is committed to providing these services with a client focus whilst conscious of the need to maintain the integrity and reputation of Australian wine. Wine Australia aims to provide an efficient, prompt, helpful service to clients, while respecting confidentiality and upholding the law in an impartial and consistent manner. The Client Service Charter is available on Wine Australia s website. Risk factors Wine Australia s operations are financially dependent on the prosperity of the Australian wine sector. The principal source Judicial decisions and reviews by outside bodies Wine Australia was not the subject of any: judicial or administrative tribunal decisions that have had, or may have, a significant impact on the operations of Wine Australia; or reports by the Auditor-General (other than the report on the financial statements), or a Parliamentary committee. of revenue is from wine producers and exporters in the form of levies, export charges, voluntary contributions to overseas promotional programs and fees paid for export approval licences and documents. A reduction in revenue as a result of a downturn in wine production or wine exports is a risk to Wine Australia. To manage this risk, Wine Australia maintains financial reserves and monitors the situation to tailor the level of activities undertaken to the amount of revenue anticipated. Wine Australia has adopted a risk management policy and framework in order to effectively and efficiently manage its risks and embed risk management into its day to day activities. This policy and framework facilitate ongoing risk identification, analysis, monitoring and reporting. Planning and Reporting Framework Wine Australia must prepare three to five year Corporate Plans and Annual Operational Plans and report its performance in an Annual Report. All documents are available on Wine Australia s website. Corporate Plan The Corporate Plan sets out the strategy to be followed in delivering the objects of the Act over the three years ending on 30 June There were no variations to the Corporate Plan pursuant to sections 31B or 31C of the Act. Annual Operational Plan & Portfolio Budget Statement The Annual Operational Plan, agreed by the Minister, sets out the actions to be taken during the year in order to give effect to the Corporate Plan strategy. There WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 51

52 WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 52 were no variations to the Annual Operational Plan pursuant to section 31H of the Act. Wine Australia s annual strategy and budget are also included in the Department of Agriculture, Fisheries and Forestry s Portfolio Budget Statements which are tabled in Parliament. Annual Report Achievement of the Annual Operational Plan actions is reported in the Year in Review section of the Annual Report. The Annual Report is prepared in accordance with the requirements of the CAC Act. Annual General Meeting The 26th Annual General Meeting of the Industry (AGM) was held in Sydney on 6 December The Chairman and Chief Executive presented reports on the current state of the wine industry, the activities undertaken during the year and Wine Australia s plans for the future. No motions were proposed for consideration at the AGM. Freedom of information No requests for documents under the Freedom of Information Act 1982 (the FOI Act ) were received during The following information is provided in accordance with the FOI Act: Wine Australia s functions, organisational structure and decision-making powers are detailed in this report. Formal consultation arrangements are in place with the national winemakers and grape growers organisations to enable them to contribute to the formulation of policy. Wine sector representatives sit on all advisory committees. Interested parties may contact the Chief Executive or any Board Member to comment or make suggestions on policies or procedures. Freedom of information inquiries and applications may be directed to the Chief Operating Officer. Corporate Plans, Annual Operational Plans, Annual Reports and the Register of Protected Geographical Indications and Other Terms can be viewed on Wine Australia s website and are available for inspection at Wine Australia s office. Environmental objectives In accordance with the requirements of the Environment Protection and Biodiversity Conservation Act 1999, Wine Australia reports that: it supports the principles of ecologically sustainable development and seeks to ensure that its activities accord with those objectives by taking economic, environmental, social and equitable considerations into account in the decision making process. its outcome to enhance the operating environment for the benefit of the Australian wine industry contributes to ecologically sustainable development by facilitating the development of the industry in a sustainable and responsible manner. it cares for the environment by minimising the consumption of power and recycling waste products where practicable and its activities have minimal impact on the environment. Privacy Policy Wine Australia s privacy policy is published on its industry website. Wine Australia is required to submit an annual Personal Information Digest to the Privacy Commissioner. The digest can be viewed on the commissioner s website (www. privacy.gov.au). Disability strategy Wine Australia s policies, programs and services are accessible to people with disabilities and meet its obligations under the Disability Discrimination Act Wine Australia is not aware of any instance where a person with a disability has experienced any difficulty in accessing any policy, program or service it offered. Indemnities and insurance premiums for officers Wine Australia has Directors and Officers Liability insurance through ComCover. The insurer has recommended that details of the policy and the premium paid not be disclosed. No indemnities have been provided to any current or former officers.

53 PEOPLE STAFF Wine Australia employed 48 people at 30 June Location Males Females Total Full-time Part-time Full-time Part-time Australia UK Japan USA Canada Total The people that work on behalf of Wine Australia in China (3) are currently employed by Austrade and made available to Wine Australia by agreement. These employees will be directly employed by Wine Australia on 16 July Work health and safety Wine Australia is committed to providing a safe and pleasant work environment for both staff and visitors. In Wine Australia published and implemented a new work health and safety policy complying with the Work Health and Safety Act Because of its size, Wine Australia is not required to establish a health and safety committee and staff elected not to establish designated work groups or to select health and safety representatives. Wine Australia has appointed first aid officers and fire wardens. Wine Australia consults with all staff on health and safety matters and includes them in the decision making process. Wine Australia s Work Health and Safety Policy, which was agreed following consultation with all staff, facilitates effective cooperation between Wine Australia and staff in promoting and developing measures to ensure the employees health, safety and welfare at work and provides adequate mechanisms for informing the employees about the arrangements and reviewing the effectiveness of the arrangements. It also provides adequate mechanisms for the variation of the arrangements in consultation with employees and includes a dispute resolution mechanism to deal with disputes. All necessary measures were taken during the year to ensure the health, safety and welfare of staff and visitors. WHS training is required in the induction of new staff. Wine Australia continues to provide free flu vaccines to all staff. There were no reportable injuries during the year and no investigations were conducted. WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION 53

54 ORGANISATIONAL STRUCTURE BOARD CHIEF EXECUTIVE MARKET DEVELOPMENT WINE SECTOR INTELLIGENCE CHIEF OPERATING OFFICER ASIA WINE AUSTRALIA CORPORATION ANNUAL REPORT THE ORGANISATION UK/EU/IRE NORTH AMERICA AUSTRALIA REGULATORY SERVICES AND EXPORT ASSISTANCE AUDIT TRADE AND MARKET ACCESS EXPORT APPROVAL AND FACILITATION CORPORATE SERVICES ADMINISTRATION FINANCE SYSTEMS & IT LEGAL 54

55 Financial Statements YEAR ENDED 30 JUNE 2013 INDEPENDENT AUDITOR S REPORT 56 STATEMENT BY THE MEMBERS, CHIEF EXECUTIVE, CHIEF OPERATING OFFICER AND COMMERICAL MANAGER 58 INCOME STATEMENT 59 BALANCE SHEET 60 STATEMENT OF CHANGES IN EQUITY 61 CASH FLOW STATEMENT 62 SCHEDULE OF COMMITMENTS 63 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 65 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 55

56 Independent Auditor s Report WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 56

57 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 57

58 Statement by the Members, Chief Executive, Chief Operating Officer and Commercial Manager WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 58

59 Statement of Comprehensive Income FOR THE YEAR ENDED 30 JUNE 2013 EXPENSES Note Employee benefits 3A 5,510 4,440 Supplier 3B 7,472 9,482 Depreciation and amortisation 3C Write-down and impairment of assets 3D 78 - Foreign exchange losses 3E Losses from asset sales 3F Total Expenses 13,533 14,329 OWN-SOURCE INCOME Own-source revenue Sale of goods and rendering of services 4A 6,107 6,876 Interest 4B Rental income 4C Industry levies and contributions 4D 5,376 5,551 Other revenue 4E Total own-secure revenue 11,960 13,021 Gains Reversal of Make-Good Provision 4F Total Gains Total own-source income 11,964 13,140 Net cost of (contributions by) services and industry levies and contributions 1,569 1,189 Revenue from government 4G 1, Operating surplus (deficit) (519) (1,039) OTHER COMPREHENSIVE INCOME Fair value revaluation of property, plant and equipment - - Total other comprehensive income - - Total comprehensive income (loss) (519) (1,039) WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS The above statement should be read in conjunction with the accompanying notes. 59

60 Balance Sheet FOR THE YEAR ENDED 30 JUNE 2013 ASSETS Note Financial Assets Cash and cash equivalents 5A 1,655 2,185 Trade and other receivables 5B 1,231 1,151 Total financial assets 2,886 3,336 Non-Financial Assets WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 60 Land and buildings 6A Property, plant and equipment 6B Intangibles 6D Inventories 6F Other non-financial assets 6G Total non-financial assets 1,369 1,323 Total Assets 4,255 4,659 LIABILITIES Payables Suppliers 7A 739 1,567 Other payables 7B 1, Total payables 2,163 2,029 Provisions Employee provisions 8A Other provisions 8B Total provisions Total Liabilities 2,730 2,615 Net Assets 1,525 2,044 EQUITY Reserves Retained surplus (accumulated deficit) 1,323 1,904 Total Equity 1,525 2,044 The above statement should be read in conjunction with the accompanying notes.

61 Statement of Changes in Equity FOR THE YEAR ENDED 30 JUNE 2013 Retained Earnings Asset Revaluation Surplus Total Equity Balance carried forward from previous period 1,904 2, ,044 3,083 Comprehensive Income Surplus (Deficit) for the period (519) (1,039) - - (519) (1,039) Total Comprehensive Income (Loss) (519) (1,039) - (519) (1,039) Transactions with owners Reallocation of equity (62) (70) - - Sub-total transactions with owners (62) (70) - - Closing balance at 30 June 1,323 1, ,525 2,044 The above statement should be read in conjunction with the accompanying notes. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 61

62 Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2013 OPERATING ACTIVITIES Note Cash received Goods and services 6,749 6,577 Receipts from government 1, Interest Industry levies and contributions 5,407 5,587 Other Total cash received 13,552 12,927 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS Cash used Employees (5,166) (4,459) Suppliers (8,886) (9,398) Net GST paid 46 (126) Total cash used (14,006) (13,983) Net cash flows from (used by) operating activities 9 (454) (1,056) INVESTING ACTIVITIES Cash received Proceeds from the sale of property, plant and equipment 9 1 Total cash received 9 1 Cash used Purchase of property, plant and equipment (85) (871) Total cash used (85) (871) Net cash from (used by) investing activities (76) (870) Net increase (decrease) in cash held (530) (1,926) Cash and cash equivalent at the beginning of the reporting period 2,185 4,111 Cash and cash equivalents at the end of the reporting period 9 1,655 2,185 The above statement should be read in conjunction with the accompanying notes. 62

63 Schedule of Commitments AS AT 30 JUNE 2013 BY TYPE Note Commitments receivable Sublease rental income (597) (822) Net GST recoverable on commitments (103) (122) (700) (944) Other commitments Operating lease commitments payable¹ 1,728 2,418 Total Other commitments payable 1,728 2,418 Net commitments by type 1,028 1,474 BY MATURITY Commitments receivable Operating lease income One year or less (221) (235) From one to five years (376) (587) Total operating lease income (597) (822) Other commitments receivable One year or less (44) (38) From one to five years (59) (84) Total other commitments receivable (103) (122) Commitments payable Operating lease commitments One year or less From one to five years 1,019 1,541 Total operating lease commitments payable 1,728 2,418 Net commitments by maturity 1,028 1,474 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 63

64 NB: Commitments are GST inclusive where relevant. Recoveries due from the taxation authority in relation to commitments payable are disclosed as commitments receivable. 1 The amount reported as operating lease commitments comprises: Nature of lease Leases for office accommodation Premises Car Park ICT Support General description of leasing arrangement Lease payments are fixed with terms varying from 1 year to 3 years and include the lease of 3 overseas offices. An additional China office is still to be finalised as at June A Car Park lease exists adjacent to the National Wine Centre and is fixed for 3 years in line with the adjoining property lease. Internode Pipe Network with 1 year remaining The above schedule should be read in conjunction with the accompanying notes. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 64

65 Notes to and Forming Part of the Financial Statements FOR THE YEAR ENDED 30 JUNE 2013 Note Description Page 1 Summary of Significant Accounting Policies 66 2 Events after the Balance Sheet Date 72 3 Expenses 73 4 Income 75 5 Financial Assets 76 6 Non-Financial Assets 77 7 Payables 82 8 Provisions 83 9 Cash Flow Reconciliation Contingent Liabilities and Assets Members Remuneration Related Party Disclosures Senior Executive Remuneration Remuneration of Auditors Financial Instruments Reporting by Outcomes 93 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 65

66 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.1 OBJECTIVES OF WINE AUSTRALIA CORPORATION Wine Australia Corporation is a statutory authority established to provide strategic support to the Australian wine sector. The functions of the Corporation as set out in the Wine Australia Corporation Act 1980 are: To promote and control the export of grape products from Australia; To encourage and promote the consumption and sale of grape products both in Australia and overseas; To improve the production of grape products in Australia; and WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS To conduct, arrange for, and assist in, research relating to the marketing of grape products. Wine Australia s vision is to be recognised as an innovative and respected industry partner acknowledged for leadership; value creation; and exceptional communication. The Corporation is controlled by the Australian Government and is dependent upon the following industry based levies to carry out its normal activities: Wine Grape Levy A levy imposed by the Primary Industries (Excise) Act 1999 in respect of any prescribed goods (via fresh grapes, dried grapes and grape juice) used in the manufacture of wine, is collected by the Department of Agriculture, Fisheries & Forestry and a component of the levy is paid to the Wine Australia Corporation in accordance with the Wine Australia Corporation Act Wine Export Charge A levy imposed by the Primary Industries (Customs) Charges Act 1999 in respect of the free on board value of wine exported, is collected by the Department of Agriculture, Fisheries & Forestry and is paid to the Wine Australia Corporation in accordance with the Wine Australia Corporation Act BASIS OF PREPARATION OF THE FINANCIAL STATEMENTS The financial statements are general purpose financial statements and are required by clause 1(b) of Schedule 1 to the Commonwealth Authorities and Companies Act The financial statements have been prepared in accordance with: a. Finance Minister s Orders (or FMOs) for reporting periods ending on or after 1 July 2012; and b. Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that apply for the reporting period. The financial statements have been prepared on an accrual basis and in accordance with the historical cost convention, except for certain assets and liabilities at fair value. Except where stated, no allowance is made for the effect of changing prices on the results or the financial position. The financial statements are presented in Australian dollars and values are rounded to the nearest thousand dollars unless otherwise specified. Unless an alternative treatment is specifically required by an accounting standard or the FMOs, assets and liabilities are recognised in the balance sheet when and only when it is probable that future economic benefits will flow to the Corporation or a future sacrifice of economic benefits will be required and the amounts of the assets or liabilities can be reliably measured. However, assets and liabilities arising under executory contracts are not recognised unless required by an accounting standard. Liabilities and assets that are unrecognised are reported in the schedule of commitments or the schedule of contingencies. Unless alternative treatment is specifically required by an accounting standard, income and expenses are recognised in the Statement of Comprehensive Income when, and only when the flow, consumption or loss of economic benefits has occurred and can be reliably measured. 66

67 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES In the process of applying the accounting policies listed in this note, the Corporation has made a judgement that have the most significant impact on the amounts recorded in the financial statements: the fair value of land and buildings has been taken to be the market value of similar properties as determined by an independent valuer. In some instances, Corporation buildings are purpose-built and may in fact realise more or less in the market. No accounting assumptions or estimates have been identified that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next accounting period. 1.4 NEW AUSTRALIAN ACCOUNTING STANDARDS Adoption of new Australian Accounting Standard Requirements No accounting standard has been adopted earlier than the application date as noted in the standard. Other new standards/revised standards/interpretations/amending standards that were issued prior to the sign-off date and are applicable to the future reporting period are not expected to have a future financial impact on the Corporation. Future Australian Accounting Standard Requirements Other new standards/revised standards/interpretations/amending standards that were issued prior to the sign-off date and are applicable to the future reporting period are not expected to have a future financial impact on the Corporation. 1.5 REVENUE Revenue from the sale of goods is recognised when: a. the risks and rewards of ownership have been transferred to the buyer; b. the Corporation retains no managerial involvement nor effective control over the goods; c. the revenue and transaction costs incurred can be reliably measured; and d. it is probable that the economic benefits associated with the transaction will flow to the Corporation. Revenue from rendering of services is recognised by reference to the stage of completion of contracts at the reporting date. The revenue is recognised when: a. The amount of revenue, stage of completion and transaction costs incurred can be reliably measured; and b. The probable economic benefits associated with the transaction will flow to the Corporation The stage of completion of contracts at the reporting date is determined by reference to the proportion that costs incurred to date bear to the estimated total costs of the transaction. Receivables for goods and services, which have 30 day terms, are recognised at the nominal amounts due less any impairment allowance account. Collectability of debts is reviewed at the end of the reporting period. Allowances are made when collectability of the debt is no longer probable. Interest revenue is recognised using the effective interest method as set out in AASB 139 Financial Instruments: Recognition and Measurement. Government Grants Grants received or receivable from Government is recognised as Revenue from Government unless they are in the nature of an equity injection or loan. 1.6 GAINS Resources received free of charge Resources received free of charge are recognised as gains when, and only when, a fair value can be reliably determined and the services would have been purchased if they had not been donated. Use of those resources is recognised as an expense. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 67

68 Resources received free of charge are recorded as either revenue or gains depending on their nature. Contributions of assets at no cost of acquisition or for nominal consideration are recognised as gains at their fair value when the asset qualifies for recognition, unless received from another Government corporation as a consequence of a restructuring of administrative arrangements (refer note 1.7). WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 68 Sale of Assets Gains from disposal of assets are recognised when control of the asset has passed to the buyer. 1.7 TRANSACTIONS WITH THE GOVERNMENT AS OWNER Equity Injections Amounts appropriated which are designated as equity injections for a year (less any formal reductions) and Departmental Capital Budgets (DCBs) are recognised directly in contributed equity in that year. Restructuring of Administrative Arrangements Net assets from or relinquished to another Government corporation under a restructuring of administrative arrangements are adjusted at their book value directly against contributed equity. Other Distributions to Owners The FMOs require that distributions to owners be debited to contributed equity unless it is in the nature of a dividend. 1.8 EMPLOYEE BENEFITS Liabilities for short-term employee benefits (as defined in AASB 119 Employee Benefits) and termination benefits due within twelve months of the end of the reporting period are measured at their nominal amounts. The nominal amount is calculated with regard to the rates expected to be paid on settlement of the liability. Other long-term employee benefit liabilities are measured as net total of the present value of the defined benefit obligation at the end of the reporting period minus the fair value at the end of the reporting period of plan assets (if any) out of which the obligations are to be settled directly. Leave The liability for employee benefits includes provision for annual leave and long service leave. No provision has been made for sick leave as all sick leave is non-vesting and the average sick leave taken in future years by employees of the Corporation is estimated to be less than the annual entitlement for sick leave. The leave liabilities are calculated on the basis of employees remuneration at the estimated salary rates that will be applied at the time the leave is taken, including the Corporation s employer superannuation contribution rates to the extent that the leave is likely to be taken during service rather than paid out on termination. The liability for long service leave has been determined as an estimate of the present value of the liability taking into account attrition rates and pay increases through promotion and inflation. Separation and redundancy Provision is made for separation and redundancy benefit payments. The Corporation recognises a provision for termination when it has developed a detailed formal plan for the terminations and has informed those employees affected that it will carry out the terminations. Superannuation The Corporation contributes to private superannuation plans for the majority of its employees and to the Public Sector Superannuation Scheme (PSS) for the remainder. The private funds are accumulation plans, while the PSS is a defined benefit scheme for the Australian Government. The liability for defined benefits is recognised in the financial statements of the Australian Government and is settled by the Australian Government in due course. This liability is reported in the Department of Finance and Deregulation s administered schedules and notes. The basis of contributions to the plans is, for private schemes - as determined by the Corporation, for the PSS - at rates determined

69 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE 2013 by an actuary to be sufficient to meet the cost to the Government. The Corporation accounts for the contributions to the PSS as if they were contributions to a defined contribution Plan. The liability for superannuation recognised as at 30 June represents outstanding contributions for the final month of the year. 1.9 LEASES A distinction is made between finance leases and operating leases. Finance leases effectively transfer from the lessor to the lessee substantially all the risks and rewards incidental to ownership of leased assets. An operating lease is a lease that is not a finance lease. In operating leases, the lessor effectively retains substantially all such risks and benefits. Where an asset is acquired by means of a finance lease, the asset is capitalised at either the fair value of the lease property or, if lower, the present value of minimum lease payments at the inception of the contract and a liability recognised at the same time and for the same amount. The discount rate used is the interest rate implicit in the lease. Leased assets are amortised over the period of the lease. Lease payments are allocated between the principal component and the interest expense. Operating lease payments are expensed on a straight line basis which is representative of the pattern of benefits derived from the leased assets BORROWING COSTS All borrowing costs are expensed as incurred CASH Cash is recognised at its nominal amount. Cash and cash equivalents include: a. cash on hand; and b. on demand deposits in bank accounts with an original maturity of 3 months or less that are readily convertible to known amounts of cash and subject to insignificant risk of changes in value FINANCIAL ASSETS The Corporation classifies its financial assets in the following categories: a. financial assets at fair value through profit or loss; b. held-to-maturity investments; c. available-for-sale financial assets; and d. loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. Financial assets are recognised and derecognised upon trade date. Effective interest method The effective interest method is a method of calculating the amortised cost of a financial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest rate basis except for financial assets that are recognised at fair value through profit or loss. Held-to-maturity investments Non-derivative financial assets with fixed or determinable payments and fixed maturity dates that the group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest method less impairment, with revenue recognised on an effective yield basis. Loans and receivables Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest rate. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 69

70 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 70 Impairment of financial assets Financial assets are assessed for impairment at the end of each reporting period. Financial assets carried at amortised cost if there is objective evidence that an impairment loss has been incurred for loans and receivables or held to maturity investments held at amortised cost, the amount of the loss is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the asset s original effective interest rate. The carrying amount is reduced by way of an allowance account. The loss is recognised in the Statement of Comprehensive Income. Available-for-sale financial assets if there is objective evidence that an impairment loss on an available for sale financial asset has been incurred, the amount of the difference between its cost, less principal repayments and amortisation, and its current fair value, less any impairment loss previously recognised in expenses, is transferred from equity to the Statement of Comprehensive Income. Financial assets carried at cost if there is objective evidence that an impairment loss has been incurred, the amount of the impairment loss is the difference between the carrying amount of the asset and the present value of the estimated future cash flows discounted at the current market rate for similar assets FINANCIAL LIABILITIES Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities. Financial liabilities are recognised and derecognised upon trade date. Financial Liabilities at Fair Value Through Profit or Loss Financial liabilities at fair value through profit or loss are initially measured at fair value. Subsequent fair value adjustments are recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other financial liabilities Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. These liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability, or, where appropriate, a shorter period. Supplier and other payables are recognised at amortised cost. Liabilities are recognised to the extent that the goods or services have been received (and irrespective of having been invoiced) CONTINGENT LIABILITIES AND CONTINGENT ASSETS Contingent liabilities and contingent assets are not recognised in the balance sheet but are reported in the relevant schedules and notes. They may arise from uncertainty as to the existence of a liability or asset, or represent an asset or liability in respect of which the amount cannot be reliably measured. Contingent assets are disclosed when settlement is probable but not virtually certain and contingent liabilities are disclosed when settlement is greater than remote Financial Guarantee Contracts Financial guarantee contracts are accounted for in accordance with AASB 139 Financial Instruments: Recognition and Measurement. They are not treated as a contingent liability, as they are regarded as financial instruments outside the scope of AASB 137 Provisions, Contingent Liabilities and Contingent Assets ACQUISITION OF ASSETS Assets are recorded at cost on acquisition except as stated below. The cost of acquisition includes the fair value of assets transferred in exchange and liabilities undertaken. Financial assets are initially measured at their fair value plus transaction costs where appropriate. Assets acquired at no cost, or for nominal consideration, are initially recognised as assets and income at their fair value at the date of acquisition, unless acquired as a consequence of restructuring of administrative arrangements. In the latter case, assets are initially recognised as contributions by owners at the amount at which they were recognised in the Corporation s accounts immediately prior to the restructuring.

71 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE PROPERTY, PLANT AND EQUIPMENT Asset Recognition Threshold Purchases of property, plant and equipment are recognised initially at cost in the balance sheet, except for purchases costing less than $1,000, which are expensed in the year of acquisition (other than where they form part of a group of similar items which are significant in total). The initial cost of an asset includes an estimate of the cost of dismantling and removing the item and restoring the site on which it is located. This is particularly relevant to makegood provisions in property leases taken up by the Corporation where there exists an obligation to restore the property to its original condition. These costs are included in the value of the Corporation s leasehold improvements with a corresponding provision for the makegood recognised. Revaluations Fair values for each class of asset are determined as shown below: Asset Class Leasehold improvements Plant and equipment Fair Value Measured at: Depreciated replacement cost Market selling price Following initial recognition at cost, property plant and equipment were carried at fair value less subsequent accumulated depreciation and accumulated impairment losses. Valuations were conducted with sufficient frequency to ensure that the carrying amounts of assets do not differ materially from the assets fair values as at the reporting date. The regularity of independent valuations depended upon the volatility of movements in market values for the relevant assets. Revaluation adjustments are made on a class basis. Any revaluation increment is credited to equity under the heading of asset revaluation reserve except to the extent that it reversed a previous revaluation decrement of the same asset class that was previously recognised in the surplus/deficit. Revaluation decrements for a class of assets are recognised directly in the surplus/deficit except to the extent that they reversed a previous revaluation increment for that class. Any accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the asset restated to the revalued amount. Depreciation Depreciable property, plant and equipment assets are written-off to their estimated residual values over their estimated useful lives to the Corporation using, in all cases, the straight-line method of depreciation. Leasehold improvements are depreciated on a straight-line basis over the lesser of the estimated useful life of the improvements or the unexpired period of the lease. Depreciation rates (useful lives), residual values and methods are reviewed at each reporting date and necessary adjustments are recognised in the current, or current and future reporting periods, as appropriate. Depreciation rates applying to each class of depreciable asset are based on the following useful lives: Leasehold improvements Lease term Lease term Plant and equipment 3 to 7 years 3 to 7 years Impairment All assets were assessed for impairment at 30 June Where indications of impairment exist, the asset s recoverable amount is estimated and an impairment adjustment made if the asset s recoverable amount is less than its carrying amount. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Value in use is the present value of the future cash flows expected to be derived from the asset. Where the future economic benefit of an asset is not primarily dependent on the asset s ability to generate future cash flows, and the asset would be replaced if the Corporation were deprived of the asset, its value in use is taken to be its depreciated replacement cost. Derecognition An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 71

72 use or disposal INTANGIBLES The Corporation s intangibles comprise purchased and internally developed software for internal use. These assets are carried at cost less accumulated amortisation and accumulated impairment losses. Software is amortised on a straight-line basis over its anticipated useful life. The useful lives of the Corporation s software is 3 to 5 years ( : 3 to 5 years). WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS All software assets were assessed for indications of impairment as at 30 June Software to the value of $20,000 was derecognised in the accounts for INVENTORIES Inventories held for sale are valued at the lower of cost and net realisable value TAXATION The Corporation is exempt from all forms of taxation except Fringe Benefits Tax (FBT), Goods and Services Tax (GST) and State Taxation. Revenues, expenses and assets are recognised net of GST except: where the amount of GST incurred is not recoverable from the Australian Taxation Office; and for receivables and payables FOREIGN CURRENCY Transactions denominated in a foreign currency are converted at the exchange rate at the date of the transaction. Foreign currency receivables and payables are translated at the exchange rates current as at balance date. Associated currency gains and losses are brought to account in profit or loss INSURANCE The Corporation has insured for risks through the Government s insurable risk managed fund, called Comcover. Workers compensation is insured through Comcare Australia COMPARATIVE FIGURES Comparative figures have been adjusted to conform to changes in presentation in these financial statements where required. 2 EVENTS AFTER THE BALANCE SHEET DATE There has been no event after balance sheet date, with the potential to significantly affect the ongoing structure and financial activities of the Corporation. 72

73 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE EXPENSES 3A EMPLOYEE BENEFITS Wages and salaries 4,525 3,623 Superannuation Defined contribution plans Defined benefit plans Leave and other entitlements Separation and redundancies Other employee benefits Total employee benefits 5,510 4,440 3B Suppliers Goods and services Communications Information technology Levy collections Promotion consultants 408 1,178 Promotion suppliers 2,471 3,356 Travel and accommodation Other 1,987 1,864 Total goods and services 6,825 8,362 Goods and services are made up of: Provision of goods external entities Rendering of services related entities 2,256 3,778 Rendering of services external entities 4,356 4,362 Total goods and services 6,825 8,362 Other supplier expenses Operating lease rentals - related entities Minimum lease payments Operating lease rentals external entities Minimum lease payments Workers compensation premiums Total other supplier expenses 647 1,120 Total supplier expenses 7,472 9,482 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 73

74 3C DEPRECIATION AND AMORTISATION Depreciation: Property, Plant and equipment Leasehold improvements Total depreciation Amortisation: Intangibles: Computer software Total amortisation Total depreciation and amortisation WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 3D WRITE-DOWN AND IMPAIRMENT OF ASSETS Asset write-downs and impairment from: Impairment on receivables 58 Impairment on intangible assets 20 Total write-down and impairment of assets 78 3E FOREIGN EXCHANGE LOSSES Non-speculative Total foreign exchange losses F LOSSES FROM ASSET SALES Property, plant and equipment Proceeds from sale (9) (1) Carrying value of assets sold Total losses from asset sales

75 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE INCOME Revenue A SALE OF GOODS AND RENDERING OF SERVICES Provision of goods related entities Provision of goods external entities Rendering of services related entities Rendering of services external entities 5,674 6,559 Total sales of goods and rendering of services 6,107 6,876 4B INTEREST Deposits Total interest C RENTAL INCOME Operating lease: Sub-lease Total rental income D INDUSTRY LEVIES AND CONTRIBUTIONS Wine grape levy 3,234 3,293 Wine export charge 2,142 2,259 Total industry levies and contributions 5,376 5,551 4E OTHER REVENUE Export partner sponsorships Total reversal of provisions F REVERSAL OF PROVISIONS Reversal of Make-good Provision Total other revenue G REVENUE FROM GOVERNMENT Department of Foreign Affairs and Trade Export Market Development Grant 1, Total revenue from government 1, WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 75

76 5 FINANCIAL ASSETS 5A CASH AND CASH EQUIVALENTS Cash on hand or on deposit 1,655 2,185 Total cash and cash equivalents 1,655 2,185 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 76 5B TRADE AND OTHER RECEIVABLES Goods and services: Goods and services related entities Goods and services external parties 1, Total receivable for goods and services 1,112 1,033 Other: Interest receivable Other receivables GST receivable from ATO 68 Total other receivables Total trade and other receivables (gross) 1,265 1,151 Less: Impairment allowance account: Goods and services (34) Total trade and other receivables (net) 1,231 1,151 Receivables are expected to be recovered in: No more than 12 months 1,222 1,151 More than 12 months 9 Total trade and other receivables (net) 1,231 1,151 Receivables are aged as follows: Not overdue Overdue by: 0 to 30 days to 60 days to 90 days More than 90 days Total receivables (gross) 1,265 1,151 The impairment allowance account is aged as follows: Overdue by: 61 to 90 days (5) More than 90 days (29) Total impairment allowance account (34)

77 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE 2013 Reconciliation of the impairment allowance account: Goods and Services Other Receivables Total Movements in relation to 2013 Opening balance: Amounts written off (34) Amounts recovered and reversed Closing balance (34) Movements in relation to 2012 Opening balance Amounts written off Amounts recovered and reversed Closing balance 6 NON FINANCIAL ASSETS A LAND AND BUILDINGS Leasehold Improvements: Fair value Accumulated depreciation (212) (79) Total leasehold improvements Total land and buildings (non current) No indicators of impairment were found for land and buildings 6B Property, Plant and Equipment Plant and equipment: Fair value Accumulated depreciation (527) (315) Total Property, Plant and Equipment (non current) All revaluations are conducted in accordance with the revaluation policy stated at Note 1. No indicators of impairment were found for infrastructure, plant and equipment. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 77

78 6C ANALYSIS OF PROPERTY, PLANT AND EQUIPMENT TABLE A Reconciliation of the opening and closing balances of property, plant and equipment ( ) Leasehold Improvements Plant & Equipment Total As at 1 July 2012 Gross book value ,516 Accumulated depreciation and impairment (79) (315) (394) Net book value 1 July ,122 Additions: WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS By purchase Revaluations recognised in other comprehensive income Increase in makegood provision Depreciation expense (139) (243) (382) Disposals: By sales (3) (24) (27) Net book value 30 June Net book value as at 30 June 2013 represented by: Gross book value ,530 Accumulated depreciation and impairment (212) (527) (739) Net book value 30 June

79 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE C ANALYSIS OF PROPERTY, PLANT AND EQUIPMENT TABLE B Reconciliation of the opening and closing balances of property, plant and equipment ( ) Leasehold Improvements Plant & Equipment Total As at 1 July 2011 Gross book value Accumulated depreciation and impairment (90) (182) (272) Net book value 1 July Additions: By purchase Revaluations recognised in other comprehensive income Increase in makegood provision Depreciation expense (79) (204) (283) Disposals by sales (42) (42) Net book value 30 June ,122 Net book value as at 30 June 2012 represented by: Gross book value ,516 Accumulated depreciation and impairment (79) (315) (394) Net book value 30 June , D INTANGIBLES Computer software at cost: Internally developed in progress 0 20 Internally developed in use Software purchased Accumulated amortisation (1,060) (1,034) Total intangibles (non current) No indicators of impairment were found for intangible assets. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 79

80 6E ANALYSIS OF INTANGIBLES Table A: Reconciliation of the opening and closing balances of intangibles ( ) Computer Software Internally Developed Computer software purchased Total As at 1 July 2012 Gross book value ,084 Accumulated amortisation and impairment (806) (228) (1,034) Net book value 1 July Additions: WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS By purchase 8 8 Revaluations recognised in other comprehensive income Increase in makegood provision Amortisation expense (26) (26) Write-down expense (20) (20) Disposals By sales Net book value 30 June Net book value as at 30 June 2013 represented by: Gross book value ,072 Accumulated amortisation and impairment (806) (254) (1,060) Net book value 30 June

81 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE E ANALYSIS OF INTANGIBLES continued Table B: Reconciliation of the opening and closing balances of intangibles ( ) Computer Software Internally Developed Computer software purchased Total As at 1 July 2011 Gross book value ,064 Accumulated amortisation and impairment (806) (202) (1,064) Net book value 1 July Additions: By purchase Revaluations recognised in other comprehensive income Increase in makegood provision Amortisation expense (26) (26) Disposals By sales Net book value 30 June Net book value as at 30 June 2012 represented by: Gross book value ,084 Accumulated depreciation and impairment (806) (228) (1,034) Net book value 30 June F INVENTORIES Inventories held for sale Total inventories G OTHER NON-FINANCIAL ASSETS Prepayments Total other non-financial assets WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 81

82 7 PAYABLES 7A SUPPLIERS Trade creditors and accruals 729 1,520 Operating lease rentals Total suppliers payables 739 1,567 Supplier payables expected to be settled within 12 months Related entities 222 1,082 External parties Total suppliers payables 739 1,567 Settlement is usually made net 60 days for AWO Scheme suppliers and net 30 days for all other suppliers WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 7B OTHER PAYABLES Wages and salaries Superannuation Prepayments received/unearned income Lease Incentive Liability GST payable to ATO - 6 Other Total other payables 1, Total other payables are expected to be settled in: No more than 12 months 1, More than 12 months Total other payables 1,

83 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE PROVISIONS 8A EMPLOYEE PROVISIONS Leave Separation and redundancies Total employee provisions Employee provisions are expected to be settled in: No more than 12 months More than 12 months Total employee provisions B OTHER PAYABLES Provision for restoration obligations Total other provisions Other provisions are expected to be settled in: No more than 12 months More than 12 months Total other provisions Carrying amount 1 July Amounts used Reversal of unused provision (8) Additional provisions made - Closing balance 30 June The Corporation currently has one agreement for the leasing of premises which has provisions requiring the Corporation to restore the premises to their original condition at the conclusion of the leases. The Corporation has made a provision to reflect the present value of this obligation. - WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 83

84 9 CASH FLOW RECONCILIATION Reconciliation of cash and cash equivalents as per Balance Sheet to Cash Flow Statement Cash and cash equivalents as per: 1,655 2,185 Cash Flow Statement 1,655 2,185 Balance Sheet Difference Reconciliation of net cost of services to net cash from operating activities: Net contribution by services (1,569) (1,189) Add revenue from Government 1, WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS Adjustments for non-cash items Depreciation / amortisation Net write down of assets 78 Reversal of Make Good Provision (8) (119) Amortisation of Lease Incentive (59) (Gain)/Loss on disposal of assets Changes in Assets and Liabilities (Increase)/decrease in net receivables (81) (218) (Increase)/decrease in inventories (10) (10) (Increase)/decrease in prepayments (405) (42) Increase/(decrease) in supplier payables (829) 389 Increase/(decrease) in other payables 965 (203) Increase/(decrease) in employee provisions (11) (129) Increase/(decrease) in other provisions (8) (35) Net cash from (used by) operating activities (454) (1,056) 84

85 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE CONTINGENT LIABILITIES AND ASSETS Quantifiable Contingencies The Corporation has no quantifiable contingencies Unquantifiable Contingencies The Corporation has no unquantifiable contingencies Significant Remote Contingencies The Corporation has no significant remote contingencies 11 MEMBERS REMUNERATION 2013 NUMBER 2012 NUMBER The number of members of the Corporation included in these figures are shown below in the relevant remuneration bands $0 to $29, $30,000 to $59, Total number of members of the Corporation Total remuneration received or due and receivable by members of the Corporation 277, ,811 Member remuneration is determined by the Remuneration Tribunal. 12 RELATED PARTY DISCLOSURES No loans or grants were made to any member or member-related entities. Member related entities pay levies imposed by the Primary Industries (Excise) Act 1999 and the Primary Industries (Customs) Charges Act 1999 as well as charges for processing export documentation and inspection charges. These levies and charges are on the same terms and conditions as apply to all other levy payers and exporters. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 85

86 13 SENIOR EXECUTIVE REMUNERATION For the purposes of this note, the Corporation has defined senior executives as those employees who report directly to the Chief Executive Officer. These employees are the only employees considered to have the capacity and responsibility for decision making that can have a significant and direct impact on the strategic direction and financial performance of the Corporation. General Managers are classified as senior executives and are disclosed in sections 13A and 13B of this note. WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 13A 1 SENIOR EXECUTIVE REMUNERATION EXPENSE FOR THE REPORTING PERIOD Short-term employee benefits Salary (including annual leave taken) 858, ,125 Changes in annual leave accrued (13,879) 6,376 Performance bonus 189, ,939 Other 1,034, ,440 Post-employment benefits: Superannuation 100, ,783 Total post-employment benefits 100, ,783 Other long-term benefits: Change in long service leave accrued 11,865 30,548 Total other long-term benefits 11,865 30,548 Termination benefits - - Total employment benefits 1,146,032 1,138,771 Notes: 1. Note 13A excludes acting arrangements and part-year service where remuneration expensed for a senior executive is less than $150,000. Note 13A is prepared on an accrual basis. 86

87 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE B AVERAGE ANNUAL REMUNERATION PACKAGES AND BONUSES PAID TO SUBSTANTIVE SENIOR EXECUTIVES AS AT THE END OF THE REPORTING PERIOD Senior Executive No. Average annual reportable remuneration 1 As at 30 June 2013 Reportable Salary 2 $ Contributed Superannuation 3 $ Reportable Allowances 4 $ Bonus Paid 5 $ Total $ $150,000 $179, ,056 11,417 4, ,273 $240,000 $269, ,256 45, ,010 $270,000 $299, ,596 21,383 24,008 18, ,487 Total 4 Senior Executive No. Average annual reportable remuneration 1 As at 30 June 2012 Reportable Salary 2 $ Contributed Superannuation 3 $ Reportable Allowances 4 $ Bonus Paid 5 Less than $179, ,602 11,325 9, ,914 $180,000 $209, ,990 52, ,159 $210,000 $239, ,454 23,167 22, ,027 $390,000 $419, ,666 30,798 23, , ,835 Total 5 Notes: 1. This table reports substantive senior executives who received remuneration during the reporting period. Each row is an averaged figure based on head count for individuals in the band. 2. Reportable salary includes the following: a. gross payments (less any bonuses paid, which are separated out and disclosed in the bonus paid column); b. reportable fringe benefits (at the net amount prior to grossing up to account for tax benefits); and c. exempt foreign employment income. 3. The contributed superannuation amount is the average actual superannuation contributions paid to senior executives in that reportable remuneration band during the reporting period, including any salary sacrificed amounts, as per the individuals payslip. 4. Reportable allowances are the average actual allowances paid as per the total allowances line on individuals payment summaries. 5. Bonus paid represents average actual bonuses paid during the reporting period in that reportable remuneration band. The bonus paid within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the corporation during the financial year. 6. Various salary sacrifice arrangements were available to senior executives including superannuation, motor vehicle and expense payment fringe benefits. Salary sacrifice benefits are reported in the reportable salary column, excluding salary sacrificed superannuation, which is reported in the contributed superannuation column. $ Total $ WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 87

88 13C OTHER HIGHLY PAID STAFF Staff No. Average annual reportable remuneration 1 As at 30 June 2013 Reportable Salary 2 $ Contributed Superannuation 3 $ Reportable Allowances 4 $ Bonus Paid 5 $ Total $ Less than $179, , ,296 $180,000 $209, ,063 4, ,004 $210,000 $239, ,133 16,172 3,508 6, ,033 $240,000 - $269, ,457 19,616 24,000 33, ,568 Total 4 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 88 Senior Executive No. Average annual reportable remuneration 1 As at 30 June 2012 Reportable Salary 2 $ Contributed Superannuation 3 $ Reportable Allowances 4 $ Bonus Paid 5 Less than $179, ,950 5,543 10,649 7, ,089 $330,000 - $359, ,713 39,839 4, ,696 Total 3 Notes: 1. This table reports staff: a. who were employed by the Corporation during the reporting period; b. whose reportable remuneration was $150,000 or more for the financial period; and c. were not required to be disclosed in Tables A, B or director disclosures. Each row is an averaged figure based on headcount for individuals in the band. 2. Reportable salary includes the following: a. gross payments (less any bonuses paid, which are separated out and disclosed in the bonus paid column); b. reportable fringe benefits (at the net amount prior to grossing up to account for tax benefits); and c. exempt foreign employment income. 3. The contributed superannuation amount is the average actual superannuation contributions paid to staff in that reportable remuneration band during the reporting period, including any salary sacrificed amounts, as per the individuals payslips. 4. Reportable allowances are the average actual allowances paid as per the total allowances line on individuals payment summaries. 5. Bonus paid represents average actual bonuses paid during the reporting period in that reportable remuneration band. The bonus paid within a particular band may vary between financial years due to various factors such as individuals commencing with or leaving the corporation during the financial year. 6. Various salary sacrifice arrangements were available to other highly paid staff including superannuation, motor vehicle and expense payment fringe benefits. Salary sacrifice benefits are reported in the reportable salary column, excluding salary sacrificed superannuation, which is reported in the contributed superannuation column. 7. The reportable salary includes payments for unused annual leave and long service leave on termination and other eligible termination payments. $ Total $

89 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE REMUNERATION OF AUDITORS The fair value of services provided by the Auditor-General in auditing the financial statements for the reporting period. 27,500 24,750 No other services were provided by the Auditor-General 15 FINANCIAL INSTRUMENTS 15A CATEGORIES OF FINANCIAL INSTRUMENTS Financial assets Loans and receivables Cash and cash equivalents 1,655 2,185 Receivables for goods and services 1,078 1,033 Carrying amount of financial assets 2,733 3,218 Financial liabilities At amortised cost: Suppliers payable 739 1,567 Carrying amount of financial liabilities 739 1,567 15B Net Income and expenses from financial assets Loans and receivable Interest revenue Exchange gain/(loss) (49) (57) Net gain/(loss) loans and receivables Net gain/(loss) from financial assets WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 89

90 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 15C Fair Values of Financial Instruments Note Carrying Amount Fair Value Carrying Amount Fair Value Financial Assets Cash and cash equivalent 5A 1,655 1,655 2,185 2,185 Receivables for goods and services 5B 1,078 1,078 1,033 1,033 Total financial assets 2,733 2,733 3,218 3,218 Financial Liabilities (Recognised) Suppliers payable 7A ,567 1,567 Total financial liabilities (Recognised ,567 1,567 Financial Liabilities (Unrecognised) Other guarantees and indemnities 10 Total financial liabilities (Unrecognised) Due to the short term nature of financial assets their carrying value approximates their fair value. 15D Credit Risk The Corporation is exposed to minimal credit risk as the majority of loans and receivables are cash and fixed term deposits placed with the National Australia bank and user-pay charges for wine export approvals and promotional activities. The maximum exposure to credit risk is equal to the carrying amount of financial assets. In 2013 $34K (2012: $Nil) has been allocated to an impairment allowance account, in respect of financial assets whose recoverable amount is less than their gross carrying value. The Corporation manages its credit risk by undertaking background checks as appropriate prior to allowing a debtor relationship and monitors customer performance continuously. In addition, the Corporation has policies and procedures that guide employees on debt recovery techniques that are to be applied. In relation to cash and cash equivalents the Corporation manages credit risk by investing only in major Australian banking institutions through the money market and fixed term deposits. The Corporation has no collateral to mitigate against credit risk. 90

91 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE 2013 Credit risk of financial instruments not past due or individually determined as impaired: Not Past Due nor Impaired Past Due or Impaired Not Past Due nor Impaired Past Due or Impaired Cash on hand and on deposit 5A 1,655 2,185 Receivables for goods and services 5B Total financial assets 2, , Ageing of financial assets that are past due but not impaired for 2013: 0 to 30 days 31 to 60 days 61 to 90 days Over 90 days Receivables for goods and services Total receivables for goods and services Ageing of financial assets that are past due but not impaired for 2012: 0 to 30 days 31 to 60 days 61 to 90 days Over 90 days Receivables for goods and services Total receivables for goods and services WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 91

92 15E Liquidity risk The Corporation s financial liabilities are payables. The exposure to liquidity risk is based on the notion that the Corporation will encounter difficulty in meeting its obligations associated with financial liabilities. This is highly unlikely due to the Corporation s policy of holding surplus financial reserves to fund unexpected and abnormal expenditure which cannot be met from the current year s revenue. Operating deficits also require the Minister s approval. Monthly financial reporting processes and bi-monthly financial reforecasts are undertaken to ensure any increased risk is identified on a timely basis. The Corporation is dependent upon the Australian wine industry for its revenue. Approximately 40% of this revenue comes from compulsory industries levies and the remainder largely from user-pay regulatory and promotional fees. These levies are based on grape products used in the manufacture of wine and the value of wine exports and are subject to the vagaries of seasonal conditions and global market conditions. Other than levies, where payment timing is defined in the legislation, revenue is largely received prior to the activity being undertaken. This approach minimises the Corporation s liquidity risk. The following tables illustrate the maturities for financial liabilities for 2013: WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS On demand Within 1 year 1 to 5 years Over 5 years Suppliers payable 739 Total suppliers payable 739 The following tables illustrate the maturities for financial liabilities for 2012: On demand Within 1 year 1 to 5 years Over 5 years Suppliers payable 1,567 Total suppliers payable 1,567 15F Market risk The Corporation maintains offices and conducts promotional activities in a number of countries. The Corporation is exposed to a currency risk as expenses for the overseas offices are paid in local currencies. Movements in currency rates between when the expenses are recognised in the statement of comprehensive income as gains/(losses) on foreign exchange. In addition, the Corporation holds financial reserves to fund working capital requirements and to cover revenue fluctuations caused by changing seasonal conditions and short term marketing opportunities. The Corporation does not have a significant exposure to currency risk at 30 June

93 NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS continued FOR THE YEAR ENDED 30 JUNE REPORTING BY OUTCOMES 16A Outcomes of the Corporation The Wine Australia Corporation is structured to meet one outcome: To enhance the operating environment of the Australian wine industry through providing a leading role in: Market Development, Wine Sector Intelligence, Compliance and Trade. 16B Net Cost of Outcome Delivery Expenses Employees 5,510 4,440 Suppliers 7,472 9,482 Depreciation and amortisation Write-down and impairment of assets 78 - Foreign exchange losses Losses on asset sales Total expenses 13,533 14,329 Income from non-government sector Sale of goods and services 6,107 6,876 Interest Rental income Industry levies and contributions 5,376 5,551 Other revenue Sales of assets - - Reversal of Make Good provision Total non-government revenues 11,964 13,140 Net cost of (contribution by) outcome 1,569 1,189 WINE AUSTRALIA CORPORATION ANNUAL REPORT FINANCIAL STATEMENTS 93

94 Appendices CORPORATE DIRECTORY 95 WINE INDUSTRY STATISTICS 96 GLOSSARY OF TERMS AND ACRONYMS 98 COMPLIANCE INDEX 99 ALPHABETICAL INDEX 100 WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDICES 94

95 Appendix 1 Corporate Directory MEMBERS OF THE WINE AUSTRALIA CORPORATION Chairman George WAHBY Deputy Chairman Kevin McLINTOCK Members Tony JORDAN HEAD OFFICE National Wine Centre - Industry House Corner Hackney & Botanic Roads Adelaide SA 5000 Telephone: Facsimile: Wesbite: (08) (08) [email protected] PO Box 2733, Kent Town, SA 5071 NORTH AMERICA Regional Director, North America Angela SLADE 2300 M Street NW, Suite 800 Washington DC USA Telephone: Facsimile: [email protected] Josephine ROZMAN AUSTRALIA CANADA Kate THOMPSON Sue HENDERSON Bill MOULARADELLIS Brian WALSH SENIOR MANAGEMENT Chief Executive Andrew CHEESMAN Chief Operating Officer Andreas CLARK General Manager, Market Development James GOSPER Manager, Wine Sector Intelligence Peter BAILEY General Manager, Regulatory Advice Stephen GUY Commercial Manager Steven WEINERT Regional Director, Australia & Emerging Markets Aaron BRASHER c/o Tourism Australia 28th Floor, 420 George Street Sydney NSW 2000 Telephone: (02) [email protected] UNITED KINGDOM / IRELAND / EUROPE Regional Director, United Kingdom/ Ireland/Europe Yvonne MAY The Australia Centre The Strand, London WC2B 4LG UNITED KINGDOM Telephone: Facsimile: [email protected] Suite 2600, 27th Floor Brookfield Place, 161 Bay Street Toronto, Ontario, M5J 2S1 Telephone: CHINA [email protected] Regional Manager, China Willa YANG Suite 5205, Wheelock Square, 1717 West Nanjing Road, Shanghai, , P.R.China Telephone: [email protected] WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 1 95

96 Appendix 2 Wine Industry Statistics Units of measurement Vintage Vintage crush (a) tonnes Total vineyard area (a,b) ha na na WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 2 96 Yield (a) tonnes/ha na 11.1 na Total production by variety Cabernet Sauvignon (a) tonnes 183, , , , , , ,689 Chardonnay (a) tonnes 366, , , , , , ,239 Colombard (a) tonnes 56,296 59,202 62,081 45,856 56,745 52,936 66,852 Merlot (a) tonnes 90, , , , , , ,575 Muscat Gordo Blanco (a) tonnes 40,580 39,311 52,042 48,643 47,560 54,155 70,564 Pinot Gris (a) tonnes 12,340 26,156 na 39,347 na 50,426 62,228 Pinot Noir (a) tonnes 26,251 43,923 31,310 41,392 35,081 34,574 41,726 Riesling (a) tonnes 31,002 39,305 39,620 33,681 31,212 32,317 31,310 Sauvignon Blanc (a) tonnes 36,515 62,420 63,638 71,909 86,694 81,442 98,212 Semillon (a) tonnes 75, ,031 81,851 76,620 81,913 77,890 77,187 Shiraz (a) tonnes 283, , , , , , ,340 Total area by state ACT (a) ha na 103 na New South Wales (a) ha 43,728 43,574 41,888 42,621 na 39,097 na Northern Territory (a) ha na - na Queensland (a) ha 3,095 3, na 712 na South Australia (a) ha 73,407 73,155 75,532 73,409 na 71,310 na Tasmania (a) ha 1,434 1,507 1,548 1,388 na 1,320 na Victoria (a) ha 38,669 37,472 30,056 26,498 na 25,409 na Western Australia (a) ha 13,091 13,431 12,446 11,822 na 10,556 na Beverage wine production by state SA (a) 000 litres 447, , na NSW(a) (a) 000 litres 325, , na Vic (a) 000 litres 143, , na WA (a) 000 litres 43,113 42, na Other States (a) 000 litres 2,258 4, na Australia (a) 000 litres na

97 Units of measurement Domestic sales by colour Red (c) 000 litres White (c) 000 litres Sparkling (c) 000 litres Fortified and other (c) 000 litres Total (c) 000 litres Imports by source New Zealand (d) 000 litres France (d) 000 litres Italy (d) 000 litres South Africa (d) 000 litres Spain (d) 000 litres Total (d) 000 litres Australian wine exports United Kingdom (e) 000 litres United States Of America (e) 000 litres Canada (e) 000 litres China, Pr (e) 000 litres New Zealand (e) 000 litres Germany, Federal Republic (e) 000 litres Netherlands (e) 000 litres Denmark (e) 000 litres Japan (e) 000 litres Belgium (e) 000 litres Other (e) 000 litres Total (e) 000 litres WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 2 a. The and figures are based on the WFA Vintage Survey Estimate, while the previous years are from the Vineyards Survey b. The area in onwards includes wine grape vines only, in previous years drying and table grapes were include c. ABS publication , the data for is for the year ending March d. ABS special report e. Wine Australia export approval database 97

98 Appendix 3 Glossary of Terms and Acronyms WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 3 AAT Administrative Appeals Tribunal ABS Australian Bureau of Statistics AGM Annual General Meeting of the Industry AWO Australian Wine Overseas program Board The Members of the Corporation CAC Act Commonwealth Authorities and Companies Act 1997 DAFF Department of Agriculture, Fisheries and Forestry FIVS International Federation of Wine and Spirits FOB value Free on Board value FOI Act Freedom of Information Act 1982 GIC Geographical Indications Committee GWRDC Grape & Wine Research Development Corporation LIP Label Integrity Program Minister Minister for Agriculture, Fisheries and Forestry OIV International Organisation of Vine and Wine RPN Register of Protected Names WEA Wine Export Approval system WFA Winemakers Federation of Australia WGGA Wine Grape Growers Australia WH&S Work Health and Safety WSET Wine and Spirit Education Trust WSIAC Wine Sector Intelligence Advisory Committee WWTG World Wine Trade Group 98

99 Appendix 4 Compliance Index Commonwealth Authorities and Companies Act 1997 Page Annual Operational Plan 17, 51, 52 Assessment of Performance 13 Audit Committee 48 Corporate Governance Statement 51 Corporate Plan 17, 51, 52 Developments since end of Financial Year 30 Disability Strategy 52 Enabling Legislation 50 Financial Statements 55 General Policies of Government 52 Indemnities and Insurance Premiums for Officers 52 Independent Auditor s Report 56 Judicial Decisions and Reviews by Outside Bodies 51 Legislative Functions 50 Legislative Objects 50 Location of Major Activities and Functions 17 Meeting Attendance 49 Meetings Held 49 Members of Committees 49 Members of the Corporation 46 Ministerial Directions 50 Organisational structure 54 Portfolio Budget Statement 61, 52 Responsible Minister 50 Review of Operations 17 Risk Factors 51 Service Charter 51 Stakeholders 4 Wine Australia Corporation Act 1980 Page Geographical Indications Committee Report 30 Ministerial Directions 50 Other Legislation or Reporting Requirements Ecologically Sustainable Development and Environmental Performance 52 Fraud Control 10 Freedom of Information 52 Funding of Consultancy Costs for Industry Representative Organisations 50 Work Health and Safety 53 WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 4 99

100 Appendix 5 Alphabetical Index Page Page Page A E O Annual General Meeting 52 Enabling Legislation 50 Objects of the Act 50 Annual Operational Plan 17, 51, 52 Environmental Objects 52 Organisational Structure 54 Audit 48 Export Approval Process 26 Overview 4 WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 5 Audit and Finance Committee 48 Audit Report 56 Australia Report 31 Australian Wine Overseas Program 21 B Board Attendance at Meetings 49 Composition 46 Meetings 49 Members 46 Responsibility 46 C Canada Report 42 Chairman s Report 5 Chief Executive s Report 8 China Report 32 Clients 51 Client Service Charter 51 Committees Attendance at Meetings 49 Membership 49 Compliance 4, 26 Compliance Index 99 Consultancy Payments to Industry Organisations 50 Corporate Governance 51 Performance 17, 23, 26, 28 Corporate Plan 17, 51 F Financial Results 30 Statements 55 Fraud Control 10 Freedom of Information 52 Functions of the Corporation 50 G Geographical Indications 30, 52 Geographical Indications Committee 30 Glossary 98 I Indemnities 52 Insurance Premiums 52 Ireland Report 38 J Japan Report 34 Judicial Decisions 51 L Label Integrity Program 4, 27, 28 Legislation Review Committee 48, 49 M Management 48 Market Development 4, 17 Members of the Corporation 46 Minister, Responsible 50 P Planning Framework 51 Principal Outcome 17 Principal Outputs 17 Powers of the Corporation 50 R Regional Reports 32 Reporting Framework 51 Responsible Minister 50 Reviews by Outside Bodies 51 Risk Factors 51 S Staff 53 Stakeholders 4 Statement on Governance 51 T Trade 4, 28 U United Kingdom Report 36 United States of America Report 39 W Wine Australia Brand Development 17 Wine Permits 27 Wine Sector Intelligence 4, 23 Wine Sector Intelligence Advisory Committee 25, 49 D Ministerial Directions 50 Work Health and Safety 53 Developments since Year End 30 Directory 95 Disability Strategy

101 Wine Australia gratefully acknowledges the support of the following Network Members WINE AUSTRALIA CORPORATION ANNUAL REPORT APPENDIX 5 Credits Cover Photo Content Editor Design & Format Brown Brothers Jessica Pater Nila Canning 101

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