Australian wine exports hit bottom of barrel

As Australia’s diplomatic relations with China slowly thaw, a new report details the continued wine export slump in the wake of crippling tariffs imposed in 2020.

Oct 31, 2023, updated Oct 31, 2023
Image: Tom Aldahn/InDaily

Image: Tom Aldahn/InDaily

Wine Australia said the value of Australian wine exports fell 11 per cent in the 12 months to 30 September, while the volume of wine exported dipped 4 per cent in the same period of time.

The dip was the result of a “global decline in wine consumption across many mature markets” according to Wine Australia’s latest report, which determined cost-of-living pressures were also slowing down the longer-term global premiumisation trend with consumers moderating consumption as a cost-saving strategy.

Nationally, wine exports declined in value to $1.79 billion – well off the most recent peak of $3.1 billion in the 12 months ended October 2020 when China imposed punitive tariffs.

The four per cent decline in exported volume fell to 604 million litres in the year ended September 2023 – “the lowest in nearly two decades” according to Wine Australia.

“There are no signs that this trend will reverse in the short-term as the decline in value accelerated in the September quarter, falling by 16 per cent compared to the same quarter in the previous year,” Wine Australia said.

“Early estimates indicate that, while global wine production in 2023 will be below average for the fifth year in a row, it is still expected to exceed demand by around 10 per cent.

“There has been an average annual excess wine production of just under 3 billion litres since 2012, which equates to more than double Australia’s average annual wine production of 1.25 billion litres. This makes trading wine exceptionally challenging in terms of volume and pricing. Exacerbating this has been the soaring cost of living across the globe in the past 18 months.”

The report comes as relations between Australia and China appear to be thawing, with the Asian nation announcing last week that it would hold an “expedited review” of punitive duties imposed on Australian wine exports in 2020.

Beijing imposed trade sanctions on $20 billion worth of Australian products at the height of a diplomatic feud with the former Coalition Government, smashing wine, barley, timber and seafood exporters.

The tariff on wine into Australia’s previously top export market devastated the industry, with China falling from its previous number one spot to 14th in the first year, while exports dropped by 30 per cent or $860 million.

South Australia’s wine exports to China evaporated by $88 million and in the year to June 2023 were worth only $4.9 million.

South Australian Wine Industry Association CEO Inca Lee said the SA industry was doing it tough.

“We’re 60 per cent of the exports out of Australia so the South Australian results mimic exactly the national results,” she said.

“They reflect the continuing really tough trading conditions. It’s well known that decreasing global wine consumption and the oversupply of wine globally makes it tough in terms of volume and pricing strategies.”

Of the top five export markets for Australian wine, four declined in terms of value. The United States is still the top market despite an 11 per cent decline in value to $366 million.

The United Kingdom was the second biggest export market for Australian wine, though it too reduced the value of wine imported by 10 per cent.

The third largest export destination was Hong Kong, which increased value by 26 per cent to $205 million over the 12 months.

“It really is a trading hub so it really depends on those businesses importing into Hong Kong and their business models going out,” Lee  said.

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“Singapore and Hong Kong are seen as that trading hub.”

By variety of wine, four of the top five types saw declines in litres exported, especially shiraz which fell by 11 per cent.

“Shiraz is falling and cabernet has fallen as well. That’s reflecting the trends we’re seeing from value and volume overall,” Lee told InDaily.

“[South Australian wine businesses] produce a lot of shiraz and we produce a lot of cabernet sauvignon, so when you see 11 per cent value dropping and a 4 per cent volume drop overall our two biggest varietals are going to show declines as well.”

Red wine exports overall declined by 14 per cent in value to $1.14 billion and 8 per cent in volume to 306 million litres – the lowest volume of red exports since 2003.

There were some green shoots though, with pinot gris/grigio exports by litre rising by 17 per cent in the 12 months.

“That’s positive news. Smaller varietals are showing some upward movement,” Lee said.

Another positive sign was the increase in the number of exporters sending Australian wine to the world.

“There was an increase in exporters to Hong Kong, Thailand and Vietnam,” Lee said.

Lee added that SAWIA was “encouraged” by the recent diplomatic and trade developments between China and Australia.

“Whilst it won’t resolve all issues that the industry is facing at the moment, it is a positive step. We’re very encouraged by that and hope that trade will resume in the near term,” she said.

“We may get some movement on the China market in the near term, but obviously that needs to run its course, and we wait patiently for that to run its course.”

Wine Australia general manager marketing Paul Turale said in the report that there were “few positives to take out of the latest numbers”.

“Continued efforts to diversify export markets, built distribution and, ultimately, consumer preference for Australian wine must remain the focus,” Turale said.

“While commentary in this report is retrospective, it would be remiss not to acknowledge the recent news of a review into the duties currently applied to Australian wine imported to mainland China.

“We welcome the progress and remain optimistic that Chinese drinkers will have access to our world-class wines again soon, noting that the sentiment for Australian wine remains positive in the market.”

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