SECURING OUR FUTURE A sustainable funding model for the WA Wine Industry

Table of Contents

Why an APC? Pages 3 - 7

Industry Support for a Sustainable Funding Model Pages 8 – 10

What is the APC? Pages 11 -14

Structure of an APC for the WA Wine Industry Pages 15-21

What Will it Cost? Page 22

Other Industry APC Examples Page 23

Government Support Page 24

Appendix 1 - Fee For Service Functions (section 12.1 of the Act) Page 25

Appendix 2 – WoWA Current Fee Structure Page 26

Appendix 3 - Vegetable APC Summary Page 27

Appendix 4 - Citrus APC Summary Page 28

FAQ Page 29

A secure funding model for our Industry bodies

OBJECTIVE

• Create funding certainty for the state and regional wine associations to

deliver a unified, focused, sustainable and influential voice. .

• To deliver the objective of the fine wine regions for Western Australia being recognised as some of the best and most distinctive and pristine in the world requires secure funding.

• To achieve this objective, everyone is required to contribute to the industry’s direction and success in a fair and equitable way.

A unified, focused, lean and influential industry

Industry wants

A sustainable funding model will provide

Strategic Influence

Representational Unity

Strong Regional Bodies

Well resourced State and Regional bodies that focus on • Advocacy and representation (via a single fee) across all levels of government and associated agencies. This

approach will secure more opportunities for individual producers and Regional Associations • Unified position on all significant issues

• Well developed and relevant Regional strategies that increase the value of producers’ businesses and proactively

build Western Australia’s Fine Wine regionally branding

Effective

Market Development

A critical mass of resources for Regions to execute their strategic plans

• Clearly articulated regional identity

• Clearly identified regionals goals • Strong partnerships with government agencies providing resources for effective market development initiatives

that are professionally executed

Research Development

Extension

Innovation

Value Adding Skills

RD&E relevant to WA that • Converts directly to higher margin per bottle

• Drives innovation that converts to practical on the ground application across the value chain • Provides skills development and training that adds value to businesses

Risk Management Across The Value Chain

Proactive approach to risk management considering

• Biosecurity

• Social License - Wine and Health; Environmental Credentials • Access to market—positive changes to Liquor Licensing laws

• Market conditions and sales trends • Competitor innovation

• Changing consumer preferences and sentiment

The pathway to success is a secure funding model for our industry

• Increasingly government and funding bodies require industry associations

to have a strategic plan, and more importantly, that they have resources to execute their strategic plan. Government wants to align their limited resources to industry requirements.

• The key to growing and further securing the success of the fine wine regions of WA is the development of a critical mass of producers in each region with the capacity to deliver the promise of the region.

• This funding structure will address the prioritised weaknesses identified by the industry strategic plan.

• A streamlined and efficient collection mechanism will enable state and regional bodies to become more effective and capable at delivering their core value propositions for producers.

Global wine industry marketing support

We are being left behind by other countries and Australian regions. Hawke’s Bay wine sales in China Wednesday, 22 January 2014 Funding has been confirmed for a $500,000 three-year programme to increase awareness and sales of Hawke’s Bay wine into China China’s wine trade and media get a taste for South Australian wine regions Twenty of China’s leading wine importers, distributors, retailers, food and beverage professionals, educators and wine media are exploring the Adelaide Hills, Coonawarra, McLaren Vale, Clare Valley and Riverland during the week, tasting a diverse selection of wines and learning about Australia’s wine regions first hand, as part of the Vintage 2014 visit to showcase the quality of Australian wines.

The visit is hosted by Wine Australia in partnership with wine regions and the South Australian Government. South Australia collects over $4 million dollars annually from industry via compulsory levies to fund industry representation. Annually, the Barossa Valley collects $900,000 dollars, the Adelaide Hills collects $320,000 and McLaren Vale collects $398,000 to effectively operate their regional association to pursue the interest of producers and grape growers in the region. This is an all of industry investment of between .023/bottle and .013/bottle. Champagne The Comité Champagne is authorized to levy direct subscriptions from its members to cover administrative costs and to ‘pursue stakeholder interests’. Annual receipts and payments are approximately $27.36 million AUD. As a rough guide, one third of the Comité’s financial resources is spent on R & D, another third on communication, reputation building and protection of the Champagne AOC, and the remaining third on general operating expenses. This is an all of industry investment of .o9/bottle to support an industry that produces 304,000,00 bottles annually.

South Australian wine industry funding

Region where grapes are grown

Grower Contribution (where grapes not

grown by the winemaker)

Winemaker Contribution

(on grapes not grown by the winemaker)

Grower/Winemaker Contribution

(where winemaker is also the grower of

the grapes)

Estimated Annual Regional Production

Estimated Annual Regional Association

Funding

Adelaide Hills $6.50 per tonne $6.50 per tonne $13.00 per tonne 26,000 tonnes $320,000

Barossa $8.00 per tonne $7.00 per tonne $7.00 per tonne 85,000 tonnes $950,000

McLaren Vale $7.90 per tonne $10.50 per tonne $10.50 per tonne 40,000 tonnes $398,000

This compares to approximately $315,000 (from 65,000 tonnes of production) currently raised annually by the entire WA wine industry through voluntary membership funding to fund all regional associations and the state body.

South Australian wine industry funding

Examples of how the funding can be used:*

The Adelaide Hills Wine Industry Region Inc. has been established to receive payments from the fund. It is proposed it will be the sole recipient of payments from the fund.

Payments made to the Adelaide Hills Wine Industry Region Inc may be applied by that body for:

I. the reasonable operating and management expenses of the body;

II. promoting the Adelaide Hills wine industry;

III. undertaking or facilitating research and development or the collection and dissemination to Adelaide Hills winemakers and growers of Adelaide Hills grapes of information, relevant to the Adelaide Hills wine industry and, in particular, to the improvement of practices in the industry;

IV. Participation of the body in regional, State or national wine industry events;

V. Programs designed to encourage communication and cooperation between Adelaide Hills grapes winemakers and growers of Adelaide Hills grapes;

VI. other purposes of the body;

In addition the fund may be applied towards

(b) payments for other purposes for the benefit of the Adelaide Hills wine industry

(c) payment of the expenses of administering the Fund

(d) repayment of contributions to the Fund under regulation 6. * Extracted from the Adelaide Hills Wine Industry Fund Management Plan 2012 - 2017

Need for consistent funding to support organised representation

The strongest tool available to us to achieve these objectives is to introduce an APC for the Western Australian wine industry Currently the fees collected by the State association and Regional bodies in total are estimated to be $315,000 The projected fee collection to securely resource industry bodies based on current fee structures is estimated to be $563,700 due to all producers participating.

Online survey and regional workshop feedback/results

Industry showed consistent and majority support for a more organised representational structure with a centrally administered funding model. Industry consistently tells us they want one fee for all levels of representation. This provided direction for Wines of Western Australia to investigate the implementation of such a structure in collaboration with Regional Associations. Results for each workshop are shown in the following graphs.

Need for consistent funding to support organised representation

On a scale of 1 to 10 where 1 is not important and 10 is critically important, how do you rate the need for a highly organised industry with a centralised core seamlessly linked to all levels of industry

On a scale of 1 to 10 where 1 is not important and 10 is critically important, how would you rate the need for a sustainable funding model to support a highly organised structure of representation

Need for consistent funding to support organised representation

From the wine industry online survey July 2013

Q74 With regard to industry association/representative organisation fees, would you support a single fee collection, by a single administrative function, which then distributes the percentages of your fee to the relevant other bodies under a formal and transparent agreement.

In an online survey, 89% of respondents indicated they would consider an industry wide single fee collection mechanism such as an APC

What is the APC

• The Agricultural Produce Commission (APC) is a statutory authority established in Western Australia by the Agricultural Produce Commission Act of 1988.

• The Act enables Western Australian agricultural producers to form Producers’ Committees for the purpose of collecting funds to provide services to those producers.

• The APC currently has ten operational Committees, providing a wide variety of services, to such industries as vegetables, Carnarvon Bananas, table grapes, potatoes and pome, citrus and stone fruit.

What is an APC producers’ committee?

• An APC Producers’ Committee is made up of producers from the industry. For the wine industry, the Committee would be comprised of wine producers.

• A Producers’ Committee is responsible for ensuring that services to be provided to the industry are identified through consultation with the industry, and are appropriately delivered.

• A Producers’ Committee is responsible for ensuring that the FFS to fund the provision of services is correctly and fairly reviewed and set each year.

• For the wine industry the Committee would work, through consultation and engagement with the Fee for Service paying producers and State and Regional bodies, to ensure that strategic plans are developed.

• State and Regional bodies will execute the initiatives of their plan on behalf of the Committee and wine producers.

How is an APC producers’ committee formed?

• A formal poll is held of all producers, who are given an opportunity to make submissions

in favour / against the formation of the Committee.

• For the wine industry, all producers who hold a liquor licence for the purpose of producing wine will be eligible to vote.

• The Act does not stipulate a percentage majority which must be attained.

• The final decision to form the Committee is made by the APC Commission and then recommended to the Minister.

What is a Fee for Service (FFS) and how is it set?

• Fee for Service (FFS) are the funds, collected from every relevant producer, which are used for the provision of services to producers by the Committee.

• Fee for Service funds may be used for any of a number of services that are allowed under the Act (see Appendix 1). The producers voting at the Committee establishment poll determine which services the Committee will be enabled to provide through the Committee and the State and Regional bodies.

• For the wine industry, the State and Regional bodies, through consultation with producers, will determine the specific services to be provided in any year.

• The State and Regional bodies will then determine the cost to provide the service (FFS).

• State and Regional bodies will submit their recommendations and budget to the APC Wine Producers’ Committee who consider, approve and submit budgets to the Commission for its approval for any given year.

• The services to be provided and the rate for the year are considered each year, and, should it be found that services are not required for any year, the FFS can be set at $0.00 for that year.

Structure of a Wine Industry Producers’ Committee

For the wine industry it has been identified that the most efficient and effective manner to provide services to the industry, will be for the APC Wine Producers’ Committee to have the services provided by the State and Regional bodies.

Structure of a Wine Industry APC

Minister for Agriculture and Food

Wine Producers' Committee

Structure determined by industry ensuring representation by region (production and number of producers) and scale of production.

Provides extra level of oversight, ensuring State and Regional Associations execute according to Strategic Plan and annual Business Plan

Commission - 4 Commissioners Dr William Ryan (Chair), Dr Graeme Robertson,

Mrs Sue Middleton, Mrs Samantha Tough

Wines of WA Board members elected by

WA wine producers

Regional Associations Board members elected by Regional wine producers

Annual Business Plan Submitted for Funding Through Wine Industry APC

Annual Business Plan Submitted for Funding Through Wine Industry APC

WA Wine Industry Roles and Responsibilities Grid

Insert R&R Chart here WA Wine Industry Roles and Responsibilities Grid

Service Wines of WA Core Wines of WA Support Regional Associations Core

Regional Associations Support

Industry Structure and Funding (Determined by Industry Committee and as outlined in Strategic Plan)

Advocacy, Representation and Administration

Support RA’s as required to develop Strategic Plans, Business Plans and Capacity to Execute

Develop & Execute Strategic Plan Develop & Execute Business Plan Administrate and Execute to Plan

Provide Input to Advocacy and Representational Process. Ensure members are engaged with process

Market Development (Services A, E, K)

Negotiate Support from Government and Agencies Aggregate and Disseminate Opportunities Provide Representation on Committees

Support RA’s to execute Market Development Activities

Execute and Administrate Regional Programs

Provide Input to Develop Representational Priorities.

Innovation and Competitive Advantage (Services B, C, D, G)

Manage RD&E Through Tech Committee Support RA’s to extend Knowledge Administer Extension Programs

Provide Input to Tech Committee to Develop RD&E Priorities

Managing Risk (Services B, G, E)

Work With National and State Bodies to Manage Risks: Taxation Health Market Conditions Biosecurity Liquor Licensing

Support RA’s to Disseminate Information

Manage Biosecurity Risks Assist WoWA in Disseminating Information

Provide Input to Develop Priorities and Positions on Issues

How can industry ensure accountability of the Committee, the State Board and Regional Boards?

• The Commission provides independent oversight and authority to act on behalf of industry should a question of accountability arise regarding the performance of the Committee, the State Association and Regional Associations where they are deemed not to operating as mandated to do so

• The Committee provides oversight and guidance as required.

• The Committee is accountable to industry via the Commission – producers can request to resolve an issue of accountability through the Commission.

• The State Association is accountable to industry, through the mandate outlined in the constitution and against each annual business plan.

• Regional Boards are accountable to their producers by executing the Strategic Plan and Business Plans in accordance with their constitution. Remedies to enforce accountability are documented in the constitutions of each.

• Each region has both autonomy over the operation of their Association and accountability to do so in the best interest of producers within the region.

• An individual producer can take a complaint regarding the actions of the State or a Regional Board that are in breach of the Act, not acting in the best interest of all producers (State or Region) or not acting in accordance with the Strategic Plan endorsed by the APC Board / Committee, to the APC Commission. The Commission or designate would investigate and take action if appropriate.

Services to be activated for a Wine Industry APC

Insert Identified Services

Services to be Activated for a Wine Industry APC*

CORE FUNCTIONS OF STATE ASSOCIATION

CORE FUNCTIONS OF REGIONAL ASSOCIATIONS

(b) control or develop the means of controlling pests and diseases if there is a likelihood of those pests or diseases affecting the quality or volume of output of the agricultural produce;

a) advertise and promote the agricultural produce;

(c) conduct research in relation to any matter, if in the opinion of the producers’ committee that research is of advantage to producers of the agricultural produce;

(d) conduct educational or instructional programmes relating to the production of agricultural produce;

(k) support, with or without grant of financial aid, and whether or not initiated by the committee or the Commission, any scheme or activity which in the committee’s opinion is capable of assisting in the promotion or sale of the agricultural produce;

(e) develop and expand markets for the agricultural produce in Western Australia and elsewhere; Supporting Regional Association initiatives.

(e) develop and expand markets for the agricultural produce in Western Australia and elsewhere;

(g) undertake and provide market forecasting for the agricultural produce; (m) arrange for the provision of all or any of the services or the exercise of any of the functions referred to in paragraphs (a) to (la) in whole or in part by another person or organization or in conjunction with the Commission or any other person or organization.

Services that will not be activated: (f) establish a voluntary insurance scheme for the benefit of producers of the agricultural produce including insurance relating to crops; (h) establish systems of inspection for the agricultural produce for the purpose of quality control or pest and disease control; (i) formulate schemes for declaring producers of the agricultural produce to be accredited producers;

(j) establish systems to facilitate inspection of grading, packaging and storage of the agricultural produce including weight and uniformity (including uniformity of ripeness) within packages (l) provide such other services for the agricultural produce as may be prescribed; (la) establish a compensation scheme for the benefit of producers whose agricultural produce is destroyed as a result of action taken to control a pest or disease of that produce;

*From the Agricultural Produce Commission Act 1988, Part 3, Section 12: Functions of a producers’ committee

How will the wine FFS be collected and structured?

• The fee will be collected from the owner of grapes at the crusher.

• The FFS would be collected from the producer. For this purposes, a producer in the wine industry is defined as ‘Any

manufacturer of wine from WA grapes”

• A FFS will be applied to each tonne crushed, based on a similar, or in some instances, lower sliding scale than current funding structures of regional and state bodies.

• Funding will be provided to regional bodies based on their fee to provide services for their producers. This fee will be sourced from the fee on fruit grown in that region. Funding will be allocated to the State association as per its funding structure, from all GI regions.

• FFS will be paid / collected either annually or twice yearly.

Examples of FFS in practise for the WA wine industry

• Plan our activities, from state to regional, 5 years in advance

• Support in-region development across the supply chain, including market development

• Present self-funded initiatives to government agencies for additional support

• Provide industry relevant RD&E that will drive innovation

• Ensure we manage bio-security risks to protect our status as a clean and green wine producing region

• Elevate our standing in the agri-business sector ensuring we are a part of the state government’s plan to seize the

opportunities presented by developing Asian and other markets

• Influence federal government agencies, ensuring we are provided with the most favourable business environment possible

What will it cost me?

• To have a unified, focused, influential and sustainable state body, that delivers the highest level of advocacy and representation for wine producers requires a minimum of $250,000 per year to operate.

• A State membership to WFA and WGGA may be possible through the APC, replacing your current membership fee.

It is essential WA has influence in these bodies, especially with regard to taxation and Wine and Health issues. • Financial modelling shows that a current Wines of WA member will save an average 15% on their membership fee

under a FFS model that collects a minimum of $250,000 from all of industry for the State body. See Appendix 2 for current WoWA fee structure. This doesn’t include potential savings from a State WFA membership.

• The APC charges an administration fee to collect and disburse funds on behalf of industry. This fee can vary from 8 –

14%, but averages at 10%. This is significantly cheaper than what 9 regional bodies and the state body can do it for. This will allow all bodies to focus on their core business – providing opportunities for the fine wine regions of WA to prosper.

Some examples of FFS in practise in other sectors

• Carnarvon Banana industry has an industry insurance plan used in events of natural disaster. The plan has provided compensation to Carnarvon Banana growers of close to $7 million over the years.

• Table Grape growers have developed and implemented a maturity standard protocol which has resulted in premium pricing for WA table grapes, with it proven that WA volume of sale is equal to, or better than, that going through at lower prices in the eastern states of Australia.

• The vegetable industry has provided funding for marketing and promotion of WA vegetables, attracted co-funding from Horticulture Australia Ltd (HAL) for development officers, including a Vietnamese development officer to ensure the education, support and integration of significant Vietnamese growers into the WA vegetable industry.

• The pome industry has provided funding in bio security events, such as apple scab. It is also currently working with DAFWA in the development and promotion of a new apple variety which it is hoped will bring significant royalties back to WA pome growers.

• The potato producers committee provides funding towards the WA seed certification scheme which ensures the quality of WA seed potatoes.

• Western Australian citrus now attracts a premium over imported fruit and demand is very strong

What others say about an APC

Hon Ken Baston MLC, Minister for Agriculture and Food; Fisheries “The new Strategic Plan will seek industry endorsement to implement a whole-of-industry funding model. The government encourages this initiative towards becoming more unified and focused with capacity to contribute resources to effective partnerships. Those which have benefited from this approach include the citrus, apple and vegetable industries by implementing the Agricultural Produce Commission (APC) ‘fee for service’ system.” (Speech presented at the launch of the WA Wine Industry Strategic Plan 2014-24, Mon June 30, 2104)

Appendix 1 - Fee For Service Functions (section 12.1 of the Act)

• Highlight Functions to be enacted • (a) advertise and promote the agricultural produce; • (b) control or develop the means of controlling pests and diseases if there is a likelihood of those pests or diseases

affecting the quality or volume of output of the agricultural produce; • (c) conduct research in relation to any matter, if in the opinion of the producers’ committee that research is of advantage

to producers of the agricultural produce; • (d) conduct educational or instructional programmes relating to the production of agricultural produce; • (e) develop and expand markets for the agricultural produce in Western Australia and elsewhere; • (f) establish a voluntary insurance scheme for the benefit of producers of the agricultural produce including insurance

relating to crops; • (g) undertake and provide market forecasting for the agricultural produce; • (h) establish systems of inspection for the agricultural produce for the purpose of quality control or pest and disease

control; • (i) formulate schemes for declaring producers of the agricultural produce to be accredited producers; • (j) establish systems to facilitate inspection of grading, packaging and storage of the agricultural produce including

weight and uniformity (including uniformity of ripeness) within packages; • (k) support, with or without grant of financial aid, and whether or not initiated by the committee or the Commission,

any scheme or activity which in the committee’s opinion is capable of assisting in the promotion or sale of the agricultural produce;

• (l) provide such other services for the agricultural produce as may be prescribed; • (la) establish a compensation scheme for the benefit of producers whose agricultural produce is destroyed as a result of

action taken to control a pest or disease of that produce; • (m) arrange for the provision of all or any of the services or the exercise of any of the functions referred to in

paragraphs (a) to (la) in whole or in part by another person or organization or in conjunction with the Commission or any other person or organization.

Appendix 2 – Current WoWA Fee Structure

Production Volume Category Base Fee Per Tonne

Charge Bracket 2 0-29t $500 $0.00 30-49 $500 $12.50 50 - 99 $750 $8.00 100 - 199 $1,150 $6.00 200 - 299 $1,750 $4.50 300 - 499 $2,200 $4.00 500 - 749 $3,000 $2.00 750 - 999 $3,500 $1.60 1000 - 1999 $3,900 $1.10 2000 - 3999 $5,000 $1.00 4000 - 5999 $7,000 $0.75 6000 - 9999 $8,500 $0.38 10,000+ $10,000

Example: 75t total fee = $950 75t base fee = $750 75t - 50t = 25t x $8.00/t = $200

Appendix 4 – Vegetable APC Summary

Appendix 5 – Citrus APC

Appendix 3 - FAQ

FAQ APC FACTS

Will we receive less resourcing from government with an APC?

An APC provides industry self reliance.

• Other industries with an APC have accessed greater opportunities and funding to develop partnerships with

government agencies as a result. • The reality is, government will have fewer resources available in the future. It will choose to partner with industries

who demonstrate self-reliance and self-determination through unified industry structure.

What role will Regional Associations play in this?

Regional Associations develop the strategic plan that determines how funding is utilised to deliver value for their producers.

• Regional Boards, in consultation with producers and growers in their region, develop and execute the strategic plan for

the region

How is the accountability of Regional and State Boards and the Producers’ Committee maintained?

Regional and State Boards are accountable to their producers and growers by executing their Strategic Plan.

• Remedies to pursue accountability are written into the constitution of each organisation

• The Producers’ Committee is accountable to producers through the Commission. A breach of the Act, or perceived

non-performance can be addressed through direct complaint to the Commission

Do we lose our autonomy?

Industry determines what services are provided to producers through Regional and State Associations.

• The APC provides an efficient administrative service to Producer Committees.

• Producers, through engagement with their representational organisations, set the strategic direction for their industry.