Australian wine inventory remains high despite steady sales and reduced production according to Wine Australia’s Wine Production, Sales and Inventory Report 2023.
Total sales of Australian wine were 11% above production in 2022–23 after the lowest wine production in 15 years but were not enough to substantially reduce pressure on the historically high national wine inventory levels, according to Wine Australia. Wine inventory currently sits at 2.19 billion litres.
The report follows the RaboResearch Wine Quarterly Q3 2023 report revealing in August that Australia has the equivalent of 859 Olympic swimming pools worth of wine in storage.
Australian wine production was 964 million litres, the lowest since 2006–07 and the first time since then that it has fallen below 1 billion litres. Meanwhile sales of Australian wine remained steady at 1.07 billion litres, with a small increase in domestic sales countering a similar-sized decline in exports.
Wine Australia Manager, Market Insights Peter Bailey said: “This is the first time in five years that total sales volume has remained steady on a year-on-year basis.
“Sales of Australian wine have been decreasing in our domestic market and in export markets over the past five years, due to declining wine consumption combined with increased cost-of-living pressures and the effects of the significant duties on Australian wine to China.”
As a result of sales exceeding production, the national wine inventory decreased by 4% to an estimated 2.2 billion litres on 30 June 2023. The reduction was driven by red wine stocks, which were down by 10% compared with the previous year.
Red wine hit particularly hard
Bailey noted that while this shift had reduced some pressure, inventory levels remain very high, particularly for red wine.
“This is a move in the right direction for the sector as it responds to the challenge of rebalancing supply and demand,” he said.
“However, it is only a small reduction after the lowest vintage in 20 years, and stocks of red wine remain at historically high levels.”
The national stock-to-sales ratio – a measure of how many years’ worth of sales is held in inventory – was 2.57 for reds, still 45% above the 10-year average despite decreasing by 7% due to the decrease in inventory.
“The long-term average stock-to-sales ratio for red wine is around 1.8, which equates to having just under two years’ worth of sales in stock. The current level is over two-and-a-half years’ worth, which is very high in historical terms,” Bailey explained. “If the ratio is too high, it puts pressure on winery inventories and reduces demand and price for wine grapes.”
The situation for whites is better than for reds, with the stock-to-sales ratio at 1.49 – much closer to its long-term average of 1.35. It decreased by 2% in 2022–23 due to the slight increase in sales.
While supply and demand for white varieties appear to be more balanced, Bailey noted that sales of white wine in 2022–23 were 463 million litres, which is considerably lower than the 10-year average production of 579 million litres.
“Rebalancing supply and demand remains a real challenge for the sector,” Bailey said. “Our situation reflects the global environment, as world wine production has exceeded consumption every year for at least the past 10 years. This prolonged oversupply, which is the equivalent each year of more than twice Australia’s production, has put increasing pressure on all wine-producing countries.”
The Wine Production, Sales and Inventory Report 2023 can be downloaded here.