New Wine Markets Cannot Make up for China’s Drop

Article by: Hari Yellina

Wine exports to mainland China are scraping the bottom of the barrel, with only six million litres exported in the past financial year, worth $24.6 million. From June 30 of the previous year, when exports to mainland China totaled 120.7 million litres and were valued at $1.1 billion, it was a significant drop. That was prior to China later that year adding almost 220 percent import duties to imported bottles of Australian wine. For the most part, Australia’s wine growers have had a difficult fiscal year, with exports declining 10% in volume to 625 million litres and 19% in value to $2.08 billion in the year ended June 30.

The results from China were expected, according to Wine Australia’s market insights manager Peter Bailey, but there were encouraging indicators in other areas. If you exclude China from those statistics, exports climbed by 5% in value to $2.06 billion over the past 12 months. This is because we actually observed a rise in exports to countries other than China. The greatest value since 2009/10, according to Mr. Bailey. With a 9% increase to $436 million in the most recent fiscal year, the United States was the leading export destination in terms of value. It had been difficult to gain traction in the market, but Mr. Bailey said persistent effort seemed to be paying off.

The amount of that very substantial rise at $10 per litre increased by 57% to $61 million, which is the biggest level since 2009. The market in the US had been increasing at a considerably quicker rate than the commercial value segment, which had been declining, he claimed, and increased growth in premium wine exports was consistent with those patterns. The United Kingdom, which had been the greatest market in terms of volume and value over the previous year, saw a decline, cancelling out the gains. Despite a 15% reduction to 227 million litres, the market nevertheless held the top spot in terms of volume, even though its value fell 10% to $421 million.

The drop occurs after exports rose to their greatest level in a decade in 2021, which was mostly due to a jump in wine sales in the off-trade (retail, off-premises consumption), where Australia has its largest market share, according to Mr. Bailey. “That was because the on-trade was shut down as a result of COVID-19, but on top of that, exporters were bringing wine in ahead of Brexit, so in 2021/22 we saw the market revert to a more normal scenario, which is why the volume and value declined.” The Riverland, Australia’s largest wine-producing region, has experienced export losses.

The drop occurs after exports rose to their greatest level in a decade in 2021, which was mostly due to a jump in wine sales in the off-trade (retail, off-premises consumption), where Australia has its largest market share, according to Mr. Bailey. “That was because the on-trade was shut down as a result of COVID-19, but on top of that, exporters were bringing wine in ahead of Brexit, so in 2021/22 we saw the market revert to a more normal scenario, which is why the volume and value declined.” The Riverland, Australia’s largest wine-producing region, has experienced export losses.

According to Australian Grape and Wine CEO Tony Battaglene, oversupply difficulties will cause additional suffering for Australia’s wine sector in the upcoming years. “We have full fuel tanks. because we are unable to ship wine overseas due to the challenging logistics of freight, therefore I believe that producers will have significant challenges in the coming year “said Mr. Battaglene. “It means that grape prices are going to be under a lot of pressure next year and the year after; I’d say for another 24 to 36 months, some of them may not survive.” In his 24 years in the business, he claimed it was the most challenging period he had ever witnessed.

Because of the COVID-generated problems with freight, inflation, and labour shortages, he claimed that the cycle had constricted and that it would take a long time to recover. Even while some markets showed encouraging indicators, Mr. Battaglene claimed they couldn’t become as large as the Chinese market. “Markets are doing incredibly well, and we’re making good progress,” he said, citing South Korea in particular as well as Hong Kong, Singapore, and Thailand. It will take time because India is a long burn. He claimed that the recent declaration of a free trade agreement brought the business some significant victories. But really, it will take some time before the market advances.