A toast to South Australia – wine export growth stimulates industrial market activity

October 8, 2015 / By ,

In the midst of broader economic uncertainties, South Australia’s wine industry is showing promising growth, with a number of key factors contributing to the opening of new export channels across multiple international markets. As at March 2015, the Australian Grape and Wine Authority (AGWA) reported a 3.6% annual growth in wine export volumes – the first positive movement in 7 years. While an encouraging trend for winemakers nationally, the associated benefit to SA’s employment, income, and industrial sector is also exciting.

South Australia’s wine industry accounts for approximately 47% of Australia’s total volume of wine production (Winemakers Federation of Australia, 2015). The production of ‘premium food and wine from our clean environment’ has been identified as one of the State Government’s seven strategic priorities, with the Strategic Plan also drawing reference to the importance of exports to our economy. An objective has been set to increase the value of SA’s export income to $25 billion by 2020. Given that ‘food and wine’ accounts for 36% of the state’s total merchandise exports, the continued growth of this sector will be significant in achieving export objectives.

Key factors contributing positively to the growth of wine exports over the past 18 months include:

Weaker AUD & Improving UK/US economic conditions
Australia’s biggest wine export markets, the UK and US, remain pivotal to the success of the industry. Although their imports of Australian wine have remained relatively stable over the past 18 months, improving economic conditions and the downturn of the Australian dollar give rise for further market penetration in the short/medium term.

Market growth from new and existing Asian markets
Demand from China has rebounded 20% in the 12 months to March 2015 (AGWA), whilst in Japan, tariff reductions on incoming wine saw export volumes hit new highs early in 2015. Spikes in demand have also come from Thailand and Malaysia.

The construction of Treasury Wine Estates’ $20 million intermodal distribution centre was completed in early 2014. The 22,000 sqm facility provides high quality cold storage space, and close linkage to major supplier bases across the Barossa Valley via road and rail networks. For Treasury Wine Estates, the parent company of major labels Penfolds, Wolf Blass and Wynns Coonawarra Estate, the development showed significant confidence in the future of South Australian wine across both national and international markets.

For South Australia specifically, China provides a significant opportunity for future growth. A ‘food and wine trade’ agreement between the South Australian and Chinese Governments was signed in September 2015. The agreement will see a $70 million agricultural park built in one of Adelaide’s northern industrial precincts to enable the supply of South Australian produce to Shandong, China’s third largest province.

Food and wine export related tenants are showing increased interest in South Australian portside industrial properties, leading to an increase in transactional activity over the past quarter. The falling value of the Australian dollar against its major trading partners, coupled with recently signed free-trade agreements, will see the demand for Australian agricultural products growing significantly. The demand for distribution and processing space for industrial users is expected to continue over the short to medium-term and generate positive economic growth across the broader South Australian economy.

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