Wine Australia’s latest Export Report reveals the lingering impact of import tariffs in mainland China.
Overall, export volumes declined slightly by one per cent to 627 million litres, with a more significant crunch in value (down 11 per cent to $2.01 billion) in the year ending 30 September 2022.
According to Wine Australia’s Manager of Market Insights, Peter Bailey, the figures are skewed somewhat by Chinese tariffs.
“As a moving annual total result, the Export Report can demonstrate the performance of Australia’s exports and highlight some growing trends. In this report, we’re seeing the tail end of the decline in exports to mainland China having an impact on the total export figures; this is expected to wash out of the figures by the end of 2022,” Bailey said.
“When mainland China is excluded from the data, wine exports to the rest of the world held steady in value, declining by 0.2 per cent to $1.99 billion and increasing by 1 per cent in volume to 622 million litres.”
In the past year, Australian exporters shipped wine to 118 destinations around the world, an increase of seven on the year before. The strongest growth came in Southeast Asia (up 15 per cent to $291m) and North America (up six per cent to $604m).
Nevertheless, this growth was outpaced by declines in Northeast Asia (again driven by China, and down by 46 per cent to $321m) and Europe (down by 12 per cent to $621m, as a result of the UK returning to more regular shipping levels).
“There was a decline in exports to the United Kingdom, Hong Kong and Singapore, which is a result of the return to anticipated shipment levels. This decline to the UK has been delayed compared to other markets with similar COVID-19 consumption patterns, such as the United States and Canada,” Bailey said.
“Exports to the North America and Southeast Asia regions are showing growth. In particular, strong growth was recorded in exports to the US, Canada, Malaysia and Thailand.
“Pleasingly, the growth trend in the US and Canada was driven by both ends of the price spectrum; premium wine exports continued to grow and unpackaged commercial exports increased, as shipments of the record 2021 vintage accelerated following a slower than usual start due to global shipping pressures.
In all, the top five markets by value were: the US – up five per cent to $412m, worth 21 per cent of total exports; the UK – down 14 per cent to $395m, but from a high base and worth 20 percent of total exports; Canada – up by 10 per cent to $190m, worth 10 per cent of total exports; Hong Kong – down by 21 per cent to $163m, worth eight per cent of total exports; and Singapore – down by 16 per cent to $132m, worth seven per cent of total exports.
The top five markets by volume were: the UK – down 12 per cent to 222 million litres, worth 36 per cent share of total export volume; US – up 14 per cent to 139 million litres, worth 22 per cent share of total export volume; Canada – up 26 per cent to 62 million litres, worth 10 per cent share of total export volume; New Zealand – up 14 per cent to 32 million litres, worth five per cent share of total export volume; Germany – down seven per cent to 31 million litres, worth five per cent share of total export volume.
There are some positive signs for exporters, not least growth in the amount of wineries and brands exporting to America.
“The number of exporters to the US is at the highest level since 2008 and of the exporters to the US that ship wine at a value of $10 or more per litre free on board (FOB), 75 per cent experienced growth demonstrating that green shoots continue in the market for premium Australian wine,” Bailey explained.
“However, while total exports look to be stabilising, the wine sector can continue to expect market fluctuations, as rising inflation and interest rates may put pressure on margins and curtail consumer spending in key markets.
“On a positive note, over the past few months, the Australian Dollar has depreciated against the US Dollar, which assists Australian wineries to be more competitive in the US.”
Highlights from individual markets
The volume of unpackaged wine to the US increased by more than half (53 per cent) to 68m litres in the past year.
“The substantial size of this increase is because the Australian 2021 vintage was the largest on record and the shipments of this vintage had been delayed due to the ongoing global freight challenges. In the past few months, shipments of this vintage have intensified,” Wine Australia’s report read.
The average value of packaged wine increased by nine per cent to $4.47 per litre FOB, total value declined by one per cent, with the increase in average value a result of volumes declining more than values.
The decline in value and volume exports in the UK was expected, Wine Australia states, as a result of increased exports in the year ending December 2020, as exporters sought to beat the Brexit transition period deadline.
Secondly, Australian wines have a very strong position in the UK off-trade, benefiting greatly from the closure of the on-premise during the lockdown era. With the reopening of hospitality in the UK, there’s now been something of a ‘counter-swing’ in the demand for Australian wine.
Wine Australia’s report reads: “Exports to Hong Kong are returning to a more normal level after an increase in shipments to the market in 2021.”
While exports to Japan and Taiwan rose by 18 and 13 per cent respectively, offsetting some of the decline caused by Chinese tariffs.
Premiumisation appears to be at play in South Korea, where exports dropped by five in value to $43m, with much of this taking place in the segment priced below $7.50 per litre (down 44 per cent). Above $7.50, exports increased by 30 per cent.
Southeast Asia is seeing extraordinary gains for Australian wine, with Thailand increasing by 95 per cent to $53m, and Malaysia by 55 per cent to $59m.