July 26: Although Australian biggies like Treasury Wines Estate have been working in China for 25 years, it’s the focus on China for Australian producers with their backs to the wall during the recession of 2009 onwards, that has brought them rich dividends today, with exports growing at their fastest rate in the last 15 years, reaching A$2.76 billion in June ending of 2017-18, thanks to the rise of 55 % in China during this period
Wine Australia’s release of fresh figures on Tuesday shows that value growth had been generated in all of the major export destinations except for the United States where sales dropped by 8 per cent to $424 million, ostensibly due to poor image created during the last decade of Australia making too much plonk. Australians are quite good at changing focus and are planning an industry-wide marketing drive aimed at lifting the profile of higher-priced premium wine in that market and change the impression.
Wine Australia has just concluded a special four-day event called Australia Decanted at Lake Tahoe in California organised on July 22-25. This was designed to convince 100 important opinion makers from the US wine industry that Australia offered much more than just cheap plonk-the reason why Americans had been shying away from Australian wines.
USA is the world's largest wine market, and Australia has the opportunity to capture more of the premium end of the market which is now enjoying a robust growth, according to the Report in Australian Financial Review. Australian wines had been very strong in the commercial segment of the market where 54 per cent of wines in the retail sector were under US $8 per bottle. But this part of the market is shrinking.
Hitting the Sweet Spot with China
Total Australian wine exports to China are now almost 3 times the value of shipments to the US, which still holds the No.2 export destination. Total wine sales from Australia to China including Hong Kong and Macau, increased by 55 per cent to $1.12 billion and as reported earlier in delWine, represents about 40% of the total exports. Total wine exports were 20 per cent higher this year.
China overtook the US as the biggest export destination for Australian wine in 2016. The spectacular growth has largely been driven by the largest exporter to China, Treasury Wine, through its Penfolds brand. But there have been some hiccups at the lower end of the Treasury portfolio into China, with an inventory build-up of the lower ended brands like Beringer Vineyards California, Wolf Blass and specifically Rawsons Retreat which made Treasury Wine Estate raise a red flag in May this year, turning it into a political issue between the two countries and reported in delWine. The current Article is in lieu of Part II of that Article as the problem of Customs in China seems to be the normal expected delays due to the new system and is on the wane.
TWE has announced reinforcing the premium image of Penfolds by announcing earlier this month a US-based version besides launching a Penfolds champagne and a drink called Lot 518, which is a fortified shiraz infused with the Chinese Spirit Baijiu, as already reported in delWine
Perhaps the Rawsons Streets and Wold Blass of Australia need to look at alternative markets where price was the consideration due to high taxes to continue their surge.
For earlier article please visit
Genesis of Wine Export from Australia to China (Part 1)
Subhash Arora
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