July 22: The value of Australian wine exports has continued to grow in the 12 months to June 2019, increasing by 4 per cent in value to $2.86 billion. China continued to drive growth and the United States of America (USA) also made a welcome return to growth, though there has been a drop in the UK Market, according to a Media Release by Wine Australia today. Subhash Arora reflects
When one thinks about Australian wines in India, three things come to mind instantly. The success of Barossa Valley Shiraz in the 1990’s in the US and other markets, resulted in heavy increase in plantings, resulting in over production of Shiraz, resulting in fall in prices and eventual decrease in plantings. The value of red wine crushed this year increased by 2% but there was a decrease of 2% in the planting of Shiraz.
When there was a global melt down 10 years ago, there was a concerted push to increase exports to China. It was almost as if the whole country focused in that direction and the rise in exports to China was meteoric. It may not be wrong to say that China saved a crash in the Australian wine industry. Today, Australia is behind France and Chile in volume and with the FTA signed by them last year, waiving import duty, it continues to increase its export value.
Wine Australia Chief Executive Officer Andreas Clark says Australian wine exports to China (including Hong Kong and Macau) achieved a financial year record, increasing 7 % in value to $1.2 billion. Volume, however, decreased 16 % to the equivalent of 17 million cases as exports of low-end wines below A$2.50 per litre FOB, had declined.
The third important aspect of the Aussie industry has been the perception in the heavily exported market USA where people started believing that Australia was good for making only cheap and happy wines (with the ubiquitous Yellow Tail alone crossing 9 million case sales at its peak). This was the time when wine bottles in skins (without labels) had plummeted to as low as A$2 in Aussie supermarkets. There was a Clarion Call from Wine Australia to change the image of Australian wines and focus more on higher quality wines rather than cheap, low-ended bulk wines.
Thanks to these efforts , Australia is well-placed even in China where it is second in value to France though behind France and Chile in volume. Further, thanks to the FTA between Australia and China, Australia has already overtaken France to become the number one imported wine category in mainland China by value during the current calendar year. Australia’s imported market share has jumped 13 % from 2015 to 24 % based on volume currently.
Overall export volumes decreased by 6 % to 89 million case equivalent; this volume decline was driven by a decrease of 7 % in shipments of wine below an average value of $2.50 per litre FOB. This resulted in a 10% increase in the overall average value of exported wine to $3.58 per litre, the highest level since 2009.
Wine Australia’s National Vintage Report 2019 released last week shows that the average grape price has gone up for the fifth year in a row, reaching $664 per tonne (Rs. 33 a kg.), the highest level since 2008’, according to Clark.
Increase in Export Value to USA
‘The turnaround in exports to the USA, which grew by 2 % in value to $432 million, is pleasing. Average value increasing 6 % to $2.83 per litre, the first time growth in 2 years, rewards the efforts of the many exporters who are working actively in that market to change perceptions about Australian wines and communicate about the diversity and excellence of Australia’s offering,’ says Clark, adding ‘There were increases across most major price segments in the USA with the stand out segment for growth being $7.50 to $9.99 per litre FOB.’
UK Market declines
UK market suffered a slight decline with value decreasing 3 % to $373 million and volume declining 4 % to the equivalent of 26 million cases. Average value increased 1 % to $1.58 per litre. The volume decline reflects some of the larger brands changing their strategy of getting additional product into market pre-Brexit to mitigate any disruption to exports.
‘Australia was still ranked number 1 in still wine retail sales in the 12 months ended March 2019, with a market share of 24% in volume and 23% in value’, Clark said. Off-trade sales in the UK for Australian wine grew 1% the year ended March 2019.
Clark also warned that Australian wine supplies would remain tight in the medium term with the 2019 vintage at 1.73 million tonnes, being 1% below the 10-year average. Supplies, particularly of reds that dominate Australian exports, are expected to remain stable.
Subhash Arora
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