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Happy Days are Here Again for Oz Wines

Posted: Wednesday, 03 February 2016 16:17


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Happy Days are Here Again for Oz Wines

Feb 03: Australian Day on 26 January would have seen wine exporters wishing each other Happy 2016 with Chinese wine exports clocking 66% increase in 2015 and a better performance expected in 2016 when the FTA between the two countries starts showing results, thus hoping to cross this year’s bumper export of $2.1 billion, a growth of 14%, writes Subhash Arora who believes that the tag of ‘cheap’ wines and increasing competition from Argentina may make the road ahead bumpy

Thanks to the massive jump in exports to China, Australia recorded an enviable growth in exports last year to $2.1 billion, the highest since 2007. Exports to China went up by 66 %, for a total value of $370 million whereas Hong Kong which sees a lot of wines diverted illegally to China (In India the oft-used term is re-exports and it is a substantial market, making statistics a herculean task) saw an export jump of 22% to $172 million. The Japanese market also saw an increase of 12% to $146 million.

Chief executive Andreas Clark, CEO of Wine Australia said last week at a Tasting event in London that while the United States remained Australia's largest market, and the UK market was still no. 2, exports to China experienced the greatest growth. Hong Kong continues to be the 5th largest market whereas Canada imports wines valued at $193 million to be at the 4th spot. "But pleasingly we've also seen a return to growth in our number one market, which is the USA, which has been pretty hard for the last few years but was up 4 per cent last year to $443 million," he is reported to have said, according to Rural Daily.

UK sales have been flat causing worry to many producers who feel that the image of cheap Australian wine is hurting them."Growth is still patchy. These numbers are a really strong signal that we're on a pathway to a return to prosperity but there's still a lot of work to be done. A lot of shoe leather that needs to be worn out getting out into markets and selling our wine," said Clarke, implying that direct contact with the importers is going to be a key factor. As Neil McGuigan, CEO of Australian Vintage pointed out to delWine in Hong Kong recently, “We have stopped travelling to the markets with as much fervour as our forefathers did. We send our reps but more direct contacts need to be developed in order to reduce the lead time of getting the orders.’

It is an interesting fact that 5-6 years ago when there was a sudden meltdown and the markets were under severe pressure, hordes of Australian producers pitched their tents in China for future growth. Their hard work and efforts are now seeing fructification. Some quarters feel that China would soon become the number two market and might become as important as the US market. A shift away from the expensive classified growths may also help capture the market share.

Most people agree that the China-Australia FTA has not shown any impact last year and the whole year’s impact will be seen in 2016. Under ChAFTA, the tariff on bulk wine has already been reduced from 20 per cent to 12 per cent while the tariff on bottled wine has gone down from 14 per cent to 8.4 per cent. Last year’s growth in China came before the ratification of the China-Australia free trade agreement. In other countries like Korea and Japan sales have been reported to have jumped up after the mutual FTAs were signed.

In India too, the sales of Australian wines are booming, in numbers if not the value. Export of Jacobs Creek basic varietal wines alone makes it the biggest importer in India, with a last year estimate of 70,000 cases whereas the erstwhile biggest importer Brindco showed lower sales (though higher value) at around 60,000 cases. Between the entry-level trio of Jacobs Creek, Hardys and Yellow Tail, we are expected to flirt with the 100,000 mark, making the volumes clearly ahead of France and Italy who have been hit hardest with the FSSAI safety control regime that created havoc because of labelling restrictions. In fact, even Jacobs would have done better sales and would have introduced nice quaffable JC Reserve but for the blocking of several shipments for the same reasons until they filed a suit against the authorities and were given the relief they had prayed for in the Bombay High court. Hardys has been extremely aggressive in its promotion this year. Even Australian Vintage has now gotten into the fray to add to the low-ended quaffable wines.

However, the path to a new export record may be bumpy. The latest Rabobank wine report forecasts that Australian producers are expected to face increased competition in the export markets this year. The report suggests that the new President of Argentina, Mauricio Macri’s government saw the Argentine peso fall more than 30 per cent since he took office in December. This will make their exports much more palatable, coupled with the removal of export tariffs also boosting the profitability of exporters.

Clark is however confident that an increased demand for premium Australian wines would bring with it greater returns for exporters. “We're seeing the growth rates at higher price points, which means a greater return to Australian exporters," he said.

Subhash Arora

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Tags: Australian Day, FTA, China, Australia, Hong Kong, Andreas Clark, Wine Australia, Neil McGuigan, Australian Vintage, Australian wines, Jacobs Creek, Brindco, Hardys, Yellow Tail, FSSAI, Rabobank wine report



Tony Devitt Says:

I agree with Dan's comment "that Aussie wine exports will grow substantially over the next few years, as the wines deliver a lot of flavour for their cost". They also over deliver in terms of quality and style. Unfortunately our wine industry has not focused anywhere enough attention on using the wines of our premium regions as the flag bearers of our overseas marketing efforts. Many of these wines are made by small producers in our smaller regions. I suggest there are plenty of Old World examples where this happens. At the risk of being too parochial Australia has among the best environments for premium wine grape production on the planet and some of the World's smartest winemakers. You know where I am going with this - we have just failed to get this message across. In the words of a famous Australian entertainer; "do yourself a favour" and have a serious look at how good Australian wines really are.

Posted @ February 13, 2016 17:43


Subhash Arora Says:

I agree with you totally Dan. I know FTA is a good thing like the Article mentions about Japan and Korea. Also, the big factor will be China and Hong Kong (if we consider it quasi- China-especially for fine wines). The cheaper wines I feel will face increasing competition from Argentina where the currency went down by a whopping 30% in just over a month and the export tax has been removed. Interesting times for Australia- the No.1 exporter to India!! (a bit tongue and cheek remark, since there are no emoticons!!) Subhash Arora

Posted @ February 04, 2016 15:20


Dan Traucki Says:

Please bear in mind that the Australian dollar has fallen quite significantly as well over the last 12 months, and that the CHAFTA agreement only came into force in late December. These two factors will continue to drive export increases in 2016. The Free trade agreements will have a considerable positive effect over the next few years. As an example Chile signed their FTA with Japan around 7 years ago, at the time they were #5 imported wine and now they just overtaken France as #1, in just 7 years. So providing there are no major global ructions I am confident that Aussie wine exports will grow substantially over the next few years, as the wines deliver a lot of flavour for their cost. Cheers Dan Traucki- Wine Journalist

Posted @ February 04, 2016 14:24


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