Huge tariffs imposed by China on Australia’s top winemakers, including Penfolds producer Treasury Wine Estates, have held back the vineyard’s expansion activity and could also affect values, according to agents and appraisers.
The lack of occasional backpacker labor to pluck the fruit at harvest time is also proving a headache for wine growers and winemakers, as are expectations that grape prices this year will be falling. compared to 2020.
“It is clear that the market is adopting a wait-and-see attitude, especially on Chinese trade issues,” said Tim Altschwager, national agribusiness manager and vineyard specialist at Colliers.
“The transactions concluded in the first quarter of 2021 produced solid results. However, there is a perception that values will drop due to China’s trade restrictions, ”said Altschwager, which sells the vast portfolio of wineries, vineyards, stocks and brands of the collapsed McWilliam’s Wines group. .
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“The market is always evaluating the potential implications and taking a cautious view. Investments in the sector are expected to slow until 2021, but investors and operators with a longer view will continue to be active. “
Since the start of the pandemic, major wine-growing commercial transactions have been rare.
These include the sale of the famous Bass Phillip Estate in South Leongatha, Gippsland, home to Australia’s most expensive Pinot Noir. It was bought by a group of investors which included Burgundian winemaker Jean-Marie Fourrier, Singaporean businessman Soo Hoo Khoon Peng and Hong Kong / San Francisco-based venture capitalist Kent Ho.
In the NSW Hunter Valley, where demand for vineyards has been driven by wealthy Sydney residents seeking a respite from city life, Krinklewood’s famous organic vineyard, along with the Cellar and Cellar Door, sold for around $ 5.5 million including stock while the former Black Cluster vineyard, renowned for its old shiraz vines and once owned by French beverage giant Pernod Ricard, sold for around same award to Sydney “people of the wine industry”.
However, the failure of the private equity buyout of McWilliam’s Wines Group, one of the county’s largest and best known, in late 2020, highlighted the challenges the industry faces due to the additional tariffs. imposed on wines imported from Australia.
The group’s assets should now be split with Family wines of Calabria in acquire more than 75 percent of McWilliam’s Wines operations, including the Hanwood Estate winery and the brands near Griffith. The Medich Family Office will purchase the smallest winery and Mount Pleasant brand in the Hunter Valley.
Writing in the March 2021 real estate report by appraisal firm Herron Todd White, national agri-food director Tim Lane said there had been less activity in the table and wine grape sector.
“All of the growers who are considering expanding seem to be keeping their powder dry for now due to concerns over lower prices, export trade issues, lack of workers available to pick the fruit and the possibility real that some fruit remains unsold, ”says Lane.
According to HTW, winegrowers are already bracing for lower red grape prices, and table grape and citrus growers are nervous due to their heavy reliance on the Chinese market.
Veteran vineyard and wineries broker Toby Langley, of Langley & Co, sells two wineries on behalf of Accolade, one of the nation’s largest wineries and owned by private equity firm The Carlyle Group.
These are the Petaluma Winery, Vineyard and Cellar Door in the Adelaide Hills, priced between $ 6 million and $ 10 million, and its historic cellar and Krondorf Cellar Door in the Barossa Valley, which is expected to sell for over $ 3 million.
Despite the current challenges, Langley says prices are holding up.
“The market is stable, with reasonable levels of demand and limited stocks available,” he says.
“Industry fundamentals are driving demand as buyers seek to secure supply and strategic assets to match their long-term business goals.
“Demand is fairly widely distributed across key regions of South Australia, Victoria, Western Australia and Tasmania.”
He adds that technology plays an important role in the wine and wine industry in terms of improving yields and yields.
“This is happening in the areas of water use and water requirements, plant and soil health for vineyards and energy consumption and the reduction of filtration losses in the cellar. “says Langley.
Altschwager de Colliers, which also sells Stonehaven Winery and Norfolk Rise Wines on the SA Limestone Coast, says there remains a “reasonably strong” appetite for top quality vineyards, large-scale production facilities and well-positioned brands in recognized wine regions.
“There are basically two types of active buyers: private investors, businesses and institutions looking to acquire large farms with a long-term lease or a working relationship with a wine operator, or established wine operators looking to expand their operations, ”he said. said.
As an example of institutional appetite, in December last year New Zealand sovereign wealth fund NZ Superannution Fund acquired four wineries in Marlborough for $ 31 million from Yealands Wine Group.
Covering a combined area of 187 hectares and planted primarily with sauvignon blanc and pinot noir grapes, the vineyards will be managed by FarmRight, the rural portfolio manager of the NZ Super Fund in New Zealand.
In Australia, a major challenge remains the lack of casual labor to pick the fruits. Before the pandemic, foreign backpackers with temporary working holiday visas were helping fill the void, but with the closure of international borders, that pool of workers has disappeared.
According to the Ministry of Agriculture (ABARES), a sharp drop in the supply of foreign workers is expected to reduce the supply of horticultural products in 2020-2021 and 2021-2022.
“The supply of foreign workers on Working Holiday Maker visas and the Seasonal Worker Program has declined significantly following the introduction of COVID-19 containment measures, which have reduced international travel,” the department said.
“The major impact has been on the number of working holidaymakers, which fell from 64% in 2020 to around 61,000.”
A more important problem, however, remains the Chinese tariffs. China accounts for 82 percent of the demand for exported shiraz and cabernet wines.
Until this situation is resolved – winemakers are pushing for Morrison government to rise China’s punitive tariffs on industry – producers will hold back while they source from alternative markets.
“While the news of the imposition of tariffs of up to 212% on Australian winegrowers will be devastating for our industry, it is still too early to predict what the real or specific consequences will be,” said winemaker Andrew Calabria, from Calabria Family. Wines, who is president of the Riverina Winemakers Association.
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