Terroir rising? Varietal and quality distinctiveness of Australia s wine regions Kym Anderson School of Economics, University of Adelaide kym.anderson@adelaide.edu.au VDQS/EuAWE Annual Conference, Namur, -4 May 9 Background Australian wine production and exports expanded dramatically over the past 5 years It initially established a comparative advantage abroad in easy-drinking, value-for-money, easy-to-market commercial bottled wines Competition from imitators on the demand side, plus extreme weather events including water shortages on the supply side, are forcing Australian producers to re-position themselves in the global marketplace Vine area, Aust, 85 to 8 Share of Aust wine production exported (and consm. imported) Hectares 8 6 4 8 6 AUST (ha) SA (ha) percent 7 6 5 4 3 Wine Production Exported (%) Wine Consumption Imported (%) 4 849-5 854-55 859-6 864-65 869-7 874-75 879-8 884-85 889-9 894-95 899-94-5 99-94-5 99-94-5 99-3 934-35 939-4 944-45 949-5 954-55 959-6 964-65 969-7 974-75 979-8 984-85 989-9 994-95 999-4-5 857-58 865-66 873-74 88-8 889-9 897-98 95-6 93-4 9-99-3 937-38 945-46 953-54 96-6 969-7 977-78 985-86 993-94 -
Declining av. price, and now even quantity, of Aust. wine exports Background (continued) Given the declining competitiveness of Australian wines abroad (and even at home now, from NZ), emphasis is shifting to: National promotion of regional heroes, plus GI regions expanding their own R&D and promotion Exploitation of each region s terroir, to differentiate Assessing regional similarities and differences is also needed to assess possible strategies for dealing with climate change, incl. water challenges Regional diversity is increasing in Australia 4 indicators of diversity: Vine intensity of total cropped area Regional quality of winegrapes Varietal intensity of winegrape crush Regional similarity in terms of varietal mix
. Vine s share of cropped area in region relative to nationally, 6. Relative price as an index of wine quality Regional Quality Index: R i = P i /P where P i is the average price for region i and P is the national average winegrape price Aust regional winegrape quality index: 8 spread > than in Regional Quality Index, Aust, & 6 Percent 5 5 5 3 Percent 5 5 5 3 3 4 5 RQI, 3 4 5 RQI, 6
3. Regions varietal intensity (or specialization): Australia, 6 vs Varietal Intensity Index: Shiraz Region i s Varietal Intensity Index: V im = f im /f m where f im is the fraction of variety m in region i s crush and f m is the fraction of that variety in the national crush Examples of red and white varieties:.8.6.4..8.6.4. McLaren V Barossa Clare 6 Varietal Intensity Index: Pinot Noir 5 Varietal Intensity Index: Sav. Blanc 8 7 6 5 6 5 4 3 6 5 Tasmania Mornington Yarra Gr Sthn Adel Hills Canberra
Varietal Intensity Index: Semillon 4. Regional Similarity Index 4 3.5 3.5.5.5 Hunter Marg River Grt Sthn 6 ω ij How close is the varietal mix of region i to the national average mix, or to region j s mix? = M fim f jm m= M / M fim m= m= f jm /, Angular separation between two regions, each growing two grape varieties Regional Similarity Index, & 6 Percentage planted to variety n 6 4 4 8 Percentage planted to variety m Percent 5 5 5.4.5.6.7.8.9. RSI, Percent 5 5 5.4.5.6.7.8.9. RSI, 6
Examples of Bilateral Regional Similarity Indexes, Australia, 6 How to explain bilateral Regional Similarity Indexes differences? Adelaide Hills:.93 Yarra Valley.87 Great Southern Barossa Valley:.98 McLaren Vale.95 Goulburn Valley Canberra:.94 Eden Valley.93 Clare Valley Coonawarra:.98 Wrattonbully.95 Langhorne Cr Environment as a key contributor? climate variables soil characteristics topography, aspect to sun etc. Regional average 6 Aust winegrape price is lower at higher January temperatures Extent of red varietal winegrape price decline as Aust. MJT rises beyond 9 o C 8 6 4 8 6 4 All Varieties 8 9 3 4 5 6 8 6 4 8 6 4 8 6 4 8 6 4 Shiraz 8 9 3 4 5 6 Merlot 8 9 3 4 5 6 8 6 4 8 6 4 8 6 4 8 6 4 Cabernet Sauvignon 8 9 3 4 5 6 Pinot Noir 8 9 3 4 5 6
8 6 4 8 6 4 8 6 4 8 6 4 Extent of white varietal winegrape price decline as Aust. MJT rises beyond 9 o C Chardonnay 8 9 3 4 5 6 Sauvignon Blanc 8 9 3 4 5 6 8 6 4 8 6 4 8 6 4 8 6 4 Semillon 8 9 3 4 5 6 Riesling 8 9 3 4 5 6 Conclusions Australia s wine regions are becoming more specialized in varieties they grow best As summer temperatures rise, vineyards will have to move to higher latitudes or altitudes, and/or switch to varieties that can cope better with warmer and drier conditions The unconstrained flexibility of producers in Australia gives them freedom to re-assess optimal location of production of different varieties as climates change and water becomes more expensive Where to from here? Climate change is not the only thing producers will have to respond to in coming decades Demand-side developments include: income growth in emerging economies (after current recession) and westernization of their diets population ageing in high-income countries health and environmental concerns of consumers, and associated changes in wine consumer taxation/regulation Other supply-side developments are: concentration and multinationalization of winery ownership likewise in retailing, with global supermarket revolution emergence of new players (eg, Asian wineries as demand grows) Can some countries respond more nimbly than other? Call for papers for a -day workshop on The world s wine markets by 3 Why?To assess likely impacts of the dramatic changes expected over the next two decades Where: Adelaide, Australia When: 8-9 February (followed by AARES Annual Conference, - Feb.) Deadline for proposals: by 6 July, send -page abstract to kym.anderson@adelaide.edu.au Further details: From KymAnderson or Julian Alston (julian@primal.ucdavis.edu)
Thanks! Regional Quality Index, NZ, & 7: small range, few increases kym.anderson@adelaide.edu.au www.adelaide.edu.au/wine3 Variety Intensity Index, Chardonnay (4% of NZ winegrape crop value) Variety Intensity Index, Sauv. Blanc (6% of NZ winegrape crop value)
Variety Intensity Index, Merlot (4% of NZ winegrape crop value) Variety Intensity Index, Pinot Noir (% of NZ winegrape crop value) Regional Similarity Index, NZ 7 Share (%) of national crush Marlborough.88.96 6% Hawkes Bay.93.7 % Gisborne.86.4 3% Nelson.89.98 3% Central Otago.7.6 % Wairarapa.83.94 %