The devastating impact of Chinese import tariffs on Australian wine exports has been reflected in the latest data from Wine Australia, which shows exports decreased by 24% in value to $2.27 billion and 17% in volume to 638 million litres in the year ended September 2021.
Since the imposition of import tariffs in November 2020, exports of Australian wine to mainland China have dropped dramatically. The value of exports in the 12 months to September 2021 were down 77% to $274 million. The number of exporters shipping wine to mainland China has also dropped, from 2241 in the year ended September 2020 to 750 in the year ended September 2021.
The decline was also attributed to less wine being available to export due to low inventory levels resulting from small vintages between 2018–2020. While the 2021 Australian vintage crush was a record size, it is expected to take some time for the impact on export volumes to be realised with the majority of the 2021 vintage wines expected to be shipped over the next two quarters.
Wine Australia General Manager Corporate Affairs and Regulation Rachel Triggs said the overall declines reflect the challenges that the Australian wine sector has faced over the past 12 months.
“The decline of exports that we’re seeing now was amplified by the fact that there was a large increase in exports in September and October 2020, driven by exporters shipping wine into mainland China ahead of tariffs being imposed, into the UK ahead of the Brexit transition conclusion, and a surge in demand for Australian wine in the UK and US during the COVID-19 pandemic,” Triggs said.
“This front loading of exports led to the majority of 2020 vintage wines being shipped earlier than usual resulting in the lowest inventory levels in 10 years coming into the 2021 calendar year.”
Australian wine exports excluding mainland China increased by 9% in value to $1.99 billion and decreased by 5% in volume to 618 million litres. Reports suggest that worldwide shipping delays, linked to COVID-19 restrictions, have also impacted exports within the 12 months ended September 2021. International logistics company Hillebrand recently reported shipping lines around the world are lacking capacity and there are major delays at ports, leading to worst ever schedule reliability when combined with current record levels of ocean freight.
Australian wine was exported to 113 markets in the year ended September 2021. Several destinations recorded strong value growth in wine exports, including the United Kingdom (UK), Hong Kong, Singapore, South Korea, Denmark, Thailand and Taiwan.
“Over the past 18 months, there has been a significant increase in exports to the UK, which has led to the market solidifying its place as Australia’s number one destination by volume and it has now overtaken mainland China as the number one destination by value,” Triggs said.
“Australian wine exporters are continuing to diversify their business models and ship to a broad range of markets. For example, in this report there was an increase in the number of exporters to the US; 269 exporters shipped wine to the market, which is the highest number of exporters since the Global Financial Crisis in 2009.”
Exports decreased in all price segments except for the most premium – above $200 per litre. Although exports above $10 per litre declined by 27 per cent overall, owing to decreasing exports to mainland China, of the 88 markets that receive wines in this price segment 54 experienced growth including Hong Kong, Singapore, Thailand, the UK, South Korea, Taiwan, and the United States of America (US).
The top five markets by value
- UK – up 7% to $460 million
- US – down 11% to $393 million
- Mainland China – down 77% to $274 million
- Hong Kong – 135% to $207 million
- Canada – down 12% to $173 million.
Good & bad news from the US
Australian wine exports to the US declined by 11% in value to $393 million and 12% in volume to 123 million litres (14 million 9-litre case equivalents).
However, average value increased by 2% to $3.18 per litre. Australian wine exports to the US experienced a boost in the second half of 2020 due to the COVID-19-related surge in off-premise trade sales, where most Australian wine is sold, when the on-premise trade sector was shut-down. This year, with the on-trade re-opening and the off-trade subsiding to a more normal level of activity, there was a counter-swing and exports declined overall.
Exports to the US with an average value above $10 per litre increased by 16% in value to $43 million, most prominently in the $20 to $29.99 price segment.
“The growth in the above $10 per litre segment is a positive step as this price segment is key to ensuring Australian wine’s continued success in the US market. The premium price segments are driving growth of the broader wine category in the US,” Triggs said.
Value in the UK is also surging. In the past 12 months, exports in almost all price segments to the UK have continued to grow, with exports at an average value over $5 per litre enjoying 35% growth in value. The growth in premium wine has meant that the UK has moved from the seventh largest destination of exports above $10 per litre to fifth in the past year.
Growing export demand is the key to a successful grape & wine sector
Australian Grape & Wine has taken a major step in its partnership with the Australian Government under the Agricultural Trade and Market Access Cooperation (ATMAC) grants program by engaging widely respected industry experts Paul Henry and Andrew Stark to lead the grant’s marketing component.
“I am pleased to announce the next step in this project, with Paul Henry and Andrew Stark selected to create a strategic marketing framework and undertake two pilot market activations in key developing markets,” said Australian Grape & Wine Chief Executive Tony Battaglene.
“Working closely with Austrade, Wine Australia and the industry we will deliver a marketing and promotion strategy for new and emerging export markets that maximises our current resources and expertise to move the export dial.”
Following on from the big vintage in 2021 and the closure of the Chinese export market, it is likely that real price pressure on grapes will be felt in 2022. Large increases in shipping costs and decreases in availability of services is also causing significant problems for a number of Australian wine exporters and is likely to exacerbate the difficulty in increasing exports and diversifying markets.
“Our best opportunity to mitigate the impacts of the trade disruptions with China is to diversify our exports across a more diverse range of markets, and we’re delighted that the Australian Government, through the ATMAC program, has provided $998,000 to Australian Grape & Wine to help do just that.”
The Agricultural Trade and Market Access Cooperation (AMTAC) grants program is also providing valuable resources to help access the United States market for new exporters and develop meaningful reduction in technical market access barriers across the world.
Battaglene said: “It doesn’t matter if you are a grape grower or a winemaker, whether you sell from your cellar door or domestically to a retailer, or export, if we can sell more wine at higher prices around the world, this program will benefit the whole sector.”