Wine Australia, the Australian Government statutory authority whose core responsibilities include the promotion of Australian wine in international and domestic markets, is facing serious issues caused by a 30% or $5m decline in its funding base since 2007. Its overall revenue is expected to fall further from $13m in 2011 to $10.5m in 2012. In recent years WA has drawn down $2m of reserves to meet its marketing requirements, but this door is now closed. CEO Andrew Cheesman states that it is not possible for the organisation to maintain its existing services under current funding and levy arrangements. Another Australian Government statutory authority, the Grape and Wine Research and Development Corporation (GWRDC) receives levies on Australia’s annual grape harvest and wine yield, which are then matched by the Australian Government. The GWRDC’s 2011 revenue of $24.8m is derived from $11.2m wine industry levies, and $12.7m from the Federal Government. According to its website, the GWRDC’s role is to ‘support the development of the Australian wine industry by planning and funding collective research and development programs and then facilitating the dissemination, adoption and commercialisation of the results’. It is difficult to understand how Australia could have got it quite so wrong. At the very time this country should be investing huge dollars into export market development, the agency responsible for this role is struggling to maintain its programs. Wine Australia’s entire global market development budget of $8.5m, which supports staff, offices and business expenses plus the actual programs themselves, is being sliced and diced. Yet the Australian wine industry is investing around $12.5m annually in research, which the Government then doubles. It’s little wonder that Wine Australia spends much of its effort attempting to source marketing collateral from the budget of the GWRDC, which has a role in ‘commercialisation’. This, however, has not proven to be a straightforward process. It is also fair to question the basis by which the GWRDC allocates the spending of its ‘research’ budget. Two years ago it funded a three-year $1m program engaging the University of South Australia, the Australian Wine Research Institute and the University of Technology Sydney’s Centre for the Study of Choice to develop a computer-based tool to predict consumer preferences for South Australian winemakers in the US market. A million dollars paid for the earth-shattering result that for the $12-$40 range in both Australia and the US, ‘wine style and wine chemistry do not have a big effect on the probability of purchase for a selection of wines’. By far the most influential factors the research discovered were ‘brand, origin, packaging, price, and grape variety’. The research also unearthed that ‘fairly simple techniques could help influence sales of higher-priced Australian wine, such as brief on-shelf descriptions of wine flavours, critics point scores and indication that wines had won competition medals and awards, and even raising price in some cases’. Commenting on the tool, University of South Australia wine marketing researcher Professor Larry Lockshin is quoted as saying at the time: ‘Anybody in the wine sector can get access to it for free. It’s very basic at this stage featuring about 130 Australian red wines.’ He also suggested that if the industry wanted ‘a real whizbang tool’, they would have to pay more. Whether or not funding of this nature by the GWRDC serves any real purpose, the real questions to be answered today are these: Should the basis on which the industry pays levies for market development, compliance (the other key role of Wine Australia) and R&D be changed to suit the current circumstances? And at this critical time, should direct government support be allocated to the marketing and promotion of Australian wine, ahead of R&D? The total economic impact of the wine industry on the Australian economy is around $40b annually. It needs support, right now.
