Global networks of production and consumption for ONE economic activity, including value-added stages and global supply chains

What this dot point is asking

NESA expects you to trace your chosen economic activity through its global networks: where production happens, how value is added at each stage, where consumption occurs, and how the activity moves between them. Australian wine is a strong case study because the supply chain is fully documented, the company case fits cleanly (Treasury Wine Estates), and the recent China tariff shock provides a contemporary illustration of how trade policy reshapes global networks.

Why Australian wine

Australia is the world's fifth largest wine producer by volume (after Italy, France, Spain, the US). It is structurally an export industry: around 60 percent of production is exported. Production is concentrated in cool-climate and Mediterranean-climate regions across southern Australia. The industry employs around 173,000 people directly and indirectly.

Production geography

The wine regions

Australia has more than 60 designated wine regions (Geographical Indications, GIs) across South Australia (premium, around 50 percent of production by volume), Victoria, New South Wales, and Western Australia. The most economically significant:

• Barossa Valley (SA). 8,000 hectares planted, hot dry continental climate, famed for Shiraz. Home to Penfolds, Wolf Blass, Yalumba, Henschke, Seppeltsfield. Around 100 cellar doors.
• McLaren Vale (SA). 7,200 ha planted, coastal Mediterranean climate, Shiraz and Grenache. d'Arenberg, Wirra Wirra, Chapel Hill.
• Margaret River (WA). 5,500 ha, cool maritime climate, world-class Cabernet Sauvignon and Chardonnay. Leeuwin Estate, Cape Mentelle, Vasse Felix.
• Yarra Valley (VIC). Cool climate, Pinot Noir and Chardonnay. De Bortoli, Yarra Yering, Domaine Chandon.
• Coonawarra (SA). Cool climate, distinctive terra rossa soils on limestone, world-renowned Cabernet Sauvignon.
• Hunter Valley (NSW). Australia's oldest wine region, Semillon and Shiraz. Brokenwood, Tyrrell's, Mount Pleasant.

Production scale

Vintage 2024 crushed around 1.4 Mt of wine grapes (Wine Australia data), producing approximately 1.0 billion litres of wine, down from the record 2.0 Mt in 2021. The decline reflects China-driven oversupply correction.

Vineyard geography

Around 6,300 grape growers operate Australia's 145,000 ha of vineyard. Around 70 percent of grapes are grown under contract to wineries; the rest are estate-grown by the wineries themselves.

The value chain

Stage 1: Vineyard

Grape growing. Labour and capital intensive. Margins are thin for bulk grapes (around $400-600 per tonne in average years) but premium for icon parcels (over$5,000 per tonne for Penfolds Grange-bound Barossa Shiraz).

Stage 2: Winery

Fermentation and aging. Capital intensive (stainless steel tanks, oak barrels at $1,500-2,000 each, refrigeration). Labour costs lower than vineyard stage. Wineries range from single-family operations (10,000 bottles per year) to industrial-scale (Treasury Wine Estates' Wolf Blass facility crushes around 100,000 tonnes per year).

Stage 3: Bottling and packaging

Around 60 percent of Australian wine is sold in glass bottles, the rest in casks, bag-in-box, cans, and bulk shipping. Bulk wine (shipped in flexitanks of 24,000-litre capacity) is the fastest-growing export segment, mostly to the UK for bottling under UK private labels.

Stage 4: Distribution

Importers and distributors carry the wine into target markets. Treasury Wine Estates runs its own distribution in major markets (US, China, UK). Smaller producers contract with global distributors (Pernod Ricard, Constellation Brands' wine division before 2021 divestments).

Stage 5: Retail

Specialist retailers (Dan Murphy's, BWS, First Choice, Liquorland in Australia; Total Wine, Wine.com, Tesco internationally), restaurants, and direct-to-consumer (cellar door, online). Direct-to-consumer is the highest-margin channel for premium producers.

Where the value sits

Roughly 10-20 percent of retail value flows back to the grower, 20-30 percent to the winery, 10-15 percent to bottling and logistics, 20-30 percent to distribution and import margins, 15-25 percent to the retailer, plus tax (wine equalisation tax of 29 percent on wholesale price in Australia).

The TNC: Treasury Wine Estates

Listed on the ASX (TWE), spun out from Foster's in 2011. Brand portfolio includes Penfolds, Wolf Blass, Lindeman's, Pepperjack, Wynns, Beringer (US), Stags Leap (US). Around 12,000 ha of owned vineyards plus extensive long-term grower contracts.

FY2024 revenue around $2.7 billion, EBITS around$660 million. Penfolds is the highest-margin brand (around 50 percent EBITS margin), with Penfolds Grange retailing at $1,000-plus per bottle globally.

Treasury responded to the China tariff shock by reorienting Penfolds to multi-country sourcing (Australia, France, and US-sourced fruit blended under the Penfolds brand) to diversify supply risk.

Consumption geography

Domestic market

Australians consumed around 26 litres of wine per capita in 2023, around the global top ten. Total domestic consumption around 350 million litres per year. Around 40 percent of production by volume.

Export markets

Pre-2020 export profile (calendar year 2019):

• UK: $373 million
• China (incl. Hong Kong): $1,170 million
• US: $419 million
• Canada: $190 million
• Total exports: $2,860 million

Post-China tariffs (calendar year 2022):

• UK: $415 million
• China: $13 million (down 99 percent)
• US: $396 million
• Canada: $173 million
• Total exports: $2,090 million

The China tariff shock (28 November 2020) imposed anti-dumping duties of 116.2 percent to 218.4 percent on Australian wine in containers under 2 litres. Tariffs were removed in March 2024 following diplomatic normalisation. Exports to China resumed at modest volumes in May-December 2024.

How the global network reshapes itself

The wine case study illustrates four lessons that show up repeatedly in HSC essays:

1. Global trade is political. Demand can vanish overnight due to government decisions, not consumer preferences.
2. Value chains relocate. Treasury moved Penfolds-branded sourcing to France and the US to reduce single-country risk. Spatial pattern of production now follows brand, not nation.
3. Premium versus bulk. The Australian industry has shifted toward premium positioning since 2020. Bulk wine to the UK is a low-margin volume play. Premium bottled wine to the US, UK, Singapore, and Vietnam is a high-margin growth strategy.
4. Climate vulnerability. Yields in 2024 were affected by smoke taint (2020 fires) and heat waves. Climate change is restructuring which Australian regions can grow which grapes.