Inland Region Profitability Project

Abstract

The Wine Industry Profitability Project (WIPP) came about due to concerns that winegrape production has not been viable for several years for many growers in the three inland Australian regions – Riverina, Murray-Darling Swan Hill and Riverland.

The WIPP has been developed as a co-design model with various industry partners involved from the start and is governed by a steering committee made up of representatives from the following organisations – NSW Wine Industry Association, Wine Australia, NSW Department of Primary Industries, Charles Sturt University (CSU), Riverina Wine Grape Growers and Food Innovation Australia Limited (FIAL).

The Riverina was chosen as the pilot region for a project to examine the social and economic drivers of prosperity and profitability for winegrape production.

Phase 1 of the project was conducted by CSU, under the direction of the project steering committee, between October 2022 nd March 2023 and the outcomes are reported here. Phase 1 sought to gain an understanding of the current status of knowledge, skills, business management and vineyard practices of the Riverina winegrape industry and how growers perceive their challenges and opportunities in relation to sustainability and profitability. The aim was to build the project from the ground up and so beginning with where growers are. This was completed as a combination of a literature search and exploring the lived experience of Riverina growers through a survey and interview process. The data and information collected led to the development of recommendations for Phase 2 of the project.

Summary

The recommendations from this project to enhance profitability in the inland wine regions can be summarised below.

The next steps are to ground truth these recommendations with growers in all inland regions, and with other industry participants in these regions, prior to developing plans for further activities and investment in the broader Inland Region Profitability Project.

Recommendations:

1. Mental health and wellbeing support programs for the Riverina growers.
   • Growers currently have a negative view of the long-term attractiveness of the industry due to current season crop losses, low grape prices, increased input costs, power imbalance relationships with wineries, lack of reward for effort and an uncertain outlook of the future.
   • Growers indicate that operating a profitable grape growing business is not in their control.
   • Successive years of not making a profit result in growers not seeing a future in the industry and younger generations needing to off-farm employment.
2. Value chain analysis to improve the understanding and transparency of price setting, discounts, and quality penalties for winegrapes by Winemakers.
   • Grape prices and quality factors assessed vary between wineries and varieties.
   • Lack of contracts and prices agreed well in advance of harvest, results in a lack of security for growers to determine appropriate costs of production.
   • Wineries are capping purchase tonnes by yield and so making it impossible for growers to overcome the impact of low prices with higher volume production.
3. Improving trust and engagement between growers and wineries through events to discuss market insights.
   • Some growers mistrust some wineries and believe there may be a level of collusion.
   • Growers rank market stability as one of the main factors affecting profitability.
   • Future redevelopment needs to be done in consultation with wineries.
4. Availability of a suite of financial tools to enable growers to conduct break even analysis
   • Growers need to quickly assess potential costs of production in relation to fruit prices from their winery to determine allocation of resources.
5.  Improved understanding of emerging mechanisation and digital technologies that improve vineyard productivity and profitability to assist grower decisions around adoption. This includes the management of trial vineyards to act as demonstration and research sites.
   • Labour availability and cost pressures are likely to be the drivers of adoption of automation.
   • Developments in digital technologies mean improved decision support and opportunities to automate practices such as irrigation, pest & disease prediction and harvest logistics
   • Hinderances to tech uptake include cost of adoption and problems with reliable connectivity.
6. Availability of flexible vineyard management practices that can be reduced or paused during periods of financial and supply stress to enable adaptable grape production (resting vineyards).
   • As typical of perennial production systems, vineyards require constant management to maintain health and productivity for the lifespan of the vines.
   • Growers need reliable technical information to allow them to alter management inputs whilst not causing significant detriment to vines for future production.
7. Improved understanding of the most effective and economical methods of changing varieties.
   • Median age of the main varieties grown in the Riverina is 21 to 25 years – close to the end of expected productive life span.
   • Low profitability over consecutive years is the likely reason for aging vines because the large capital outlay required for replanting would not be available.
8. Improved understanding of the relationships between plant water use, irrigation timing, water delivery options, fertiliser use and other practices to manage crop yield within specifications.
   • Grape quality is influenced primarily by climate, cultivar, and vineyard management.
   • There is strong competition for water and labour from other industries in the region.
   • Water for irrigation is a major and highly variable cost of production depending on the seasonal availability – so efficient use is critical.
   • Irrigation strategy can affect fruit yield and quality, but the most profitable strategy of whether to use water to gain quantity or quality is not clear.
   • Riverina has a lower use of double cordon trellising, lower rootstock use, and lower vine density than other inland regions.
   • There is a relatively low use of tissue and soil nutrient analyses to better inform nutrition programs, and a decreasing use of soil water monitoring to inform irrigation timing.
9. Optimised groundcover plantings that maximise vineyard biodiversity, beneficial insects and assist in maintaining grape berry composition.
   • High use of herbicides/slashing to currently manage vineyard floors.
   • Use of groundcovers can improve soil health, water & nutrient availability and as a result benefit vine health and vineyard ecosystem.
10. Increasing demand for existing grape varieties through new product development, targeting reduced and no alcohol wines.
    • There is a growing consumer demand for low and no alcohol wines, and wines made from alternative varieties.
    • Does change in wine styles to match market demand require vineyard management changes?
11. Better understand of potentially suitable varieties from hot Mediterranean climates better suited to the Riverina region to produce dry table wines.
    • Five dominant varieties – Shiraz, Chardonnay, Cabernet Sauvignon, Merlot and Semillon – represent 62% of the Riverina vineyard area.
    • Current Riverina growing season temperatures are at the high end for the production of quality wines from the varieties typically grown and are expected to increase into the future.
    • Future plantings need to consider winery requirements along with climatic suitability.
12. Development of industry-wide marketing stories that demonstrate environment, social and governance (ESG) credentials of the region.
    • Look to market differentiation whilst maintaining access to changing consumer expectations.
    • There is little Riverina branding or marketing. 
13. Expand the project into the other inland regions.
    • Ground-truth the findings from the Riverina in the Murray-Darling and Riverland regions to see if the findings and priorities remain relevant.