What has caused a dry spell in Australian wine exports?  

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Image description: Wine exports, Australia

Highlights

• Latest figures have highlighted a dreary phase for the Australian wine sector amid the shrinking export market globally.
• Australian wine exports witnessed a fall of 24% in value and 17% in volume in the 12-month period to September 2021.
• There has been a decline in exports across all price segments, excluding the most premium – above AU$200 per litre.
• The hit was primarily driven by a drastic drop in exports to mainland China after heavy import tariffs were imposed.

The Australian wine sector is experiencing a dreary phase due to the shrinking export market in the global space. The business has contracted to the lowest values in several segments in the last 12 months, owing to imposition of heavy import tariffs and worldwide shipping delays amid COVID-19 restrictions.

The present-day scenario got into limelight with the latest release, the Export Report by Wine Australia. An Australian government statutory authority governed by the Wine Australia Act 2013, Wine Australia works closely with wine sector bodies to support long-term success of the grape and wine community of the country.

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Driven by the mission to encourage sustainable and profitable Australian winegrape and wine businesses, Wine Australia invests in research & development (R&D), establishing markets, disseminating market information and knowledge, encouraging adoption, and ensuring compliance through its regulatory functions.

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Significant decline in Australian wine exports

For the year ended September 2021, Australian wine exports witnessed a fall of 24% in value to AU$2.27 billion and 17% in volume to 638 million litres. Also, average value declined by 9% to AU$3.56 per litre free on board (FOB) during the period, as per the report.

When excluding mainland China, there was an increase of 9% in value to AU$1.99 billion in Australian wine exports. However, in terms of volume, a decline of 5% to 618 million litres was witnessed.

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There has been a decline in exports across all price segments, excluding the most premium – above AU$200 per litre. Despite an overall drop of 27% in exports above AU$10 per litre due to decreasing exports to mainland China, 54 of the 88 markets that receive wines in this price segment experienced growth including Hong Kong, Singapore, Thailand, South Korea, Taiwan, the UK, and the US.

A glance at the top 3 wine markets in terms of value & volume

• United Kingdom: Growth in premium wine boosted the UK rank from seventh to the fifth largest destination of exports above AU$10 per litre in the last 12-month period mainly.

Wine exports to the UK in almost all price segments saw continuous rise last year. There was 35% growth in value in exports at an average value over AU$5 per litre.

In the UK market, Australian wine exports jumped by 7% in value to AU$460 million and declined by 2% in volume to 251 million litres (28 million 9-litre case equivalents).

There has been an increase of 9% in average value to AU$1.83 per litre, the highest average value since mid-2011.

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• Mainland China: A drastic drop of 77% to AU$274 million was recorded in exports of Australian wine to mainland China after import tariffs imposition in November 2020. There has been a drop in the number of exporters shipping wine to mainland China from 2241 in 2020 to 750 in the reported period. 

• United States: Australian wine exports to the US went down by 11% in value to AU$393 million and 12% in volume to 123 million litres (14 million 9-litre case equivalents). Average value increased by 2% to AU$3.18 per litre.
  
  In H2 2020, Australian wine exports to the US saw a rise because of the pandemic-related increase in off-premise trade sales. However, in 2021, there was a counter-swing and exports declined, owing to on-trade re-opening and off-trade subsiding to a more normal level of activity.
  
  

What caused the sharp fall in wine exports?

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One of the elementary reasons for the decrease in Australian wine exports was a drastic drop in exports to mainland China after heavy import tariffs were imposed on Australian wine. Also, small vintages during 2018–2020 resulted in low inventory levels for wine export. However, the 2021 Australian vintage crush was a record size.

Still, it will take longer time to realise the impact on export volumes as most of the vintage wines of 2021 are likely to be shipped over the next two quarters.

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