New wine market emerges but can't make up for China's decline

Wine exports to mainland China are scraping the bottom of the barrel, with just six million liters exported in the last financial year, worth $24.6 million.

Key points:

• Wine exports to mainland China have fallen from 120 million liters per year to six million liters
• The US is now Australia’s largest export market by value
• Exports to countries other than China rose five percent to $2.06 billion

That’s a big drop from the end of the financial year in 2020, when exports to mainland China totaled 120.7 million liters and were worth $1.1 billion over the 12-month period to June 30.

That was before China imposed import tariffs of around 220 per cent on bottled Australian wine imports later that year.

Overall it has been a difficult financial year for Australian wine producers with exports down 10 percent in volume to 625 million liters and down 19 percent in value to $2.08 billion in the year ended 30 June.

Australian Wine market insight manager Peter Bailey said China’s results were expected but there were signs of hope in other markets.

“If you look at exports outside of China, we’re actually seeing an increase, so in the last 12 months if you exclude China from those numbers, exports increased five percent in value to $2.06 billion.”

“That’s the highest score since 2009/10,” Bailey said.

The United States was the top export destination in terms of value, recording a nine percent increase to $436 million in the most recent financial year.

Australian Wine export results show how far China’s exports have fallen.(Provided: Australian Wine)

That has proved a tough market to gain traction but Bailey said the ongoing efforts appear to be paying off.

“It’s been a slow burn in the US but we’re seeing some strong value growth, especially above $10 per liter despite growth in almost all price segments,” he said.

“Extremely strong growth at $10 per liter up 57 percent to $61 million and that’s at its highest level since 2009.”

He said the stronger growth in premium wine exports was consistent with the trend in the US market which has been growing at a much faster rate than the commercial value segment, which is experiencing a decline.

But the gains were offset by declines in the United Kingdom, a market that has become the largest by volume and value in the past year.

The Australian Wine export report points to growth in other markets.(Provided: Australian Wine)

The market was down 10 percent in value to $421 million but was still the largest market by volume, despite a 15 percent decline to 227 million liters.

“The decline came after exports increased to a decade high in 2021 and it really came as a result of a surge in off-trade wine sales. [retail, off-premises consumption] where Australia has the highest market share,” Bailey said.

“That’s due to COVID-19 related trade closures, but on top of that we also have exporters shipping wine ahead of Brexit so in 2021/22 we see the market return to a more normal situation resulting in a decrease in volume and value.”

Farmers struggle to adjust

Australia’s largest wine-producing region, Riverland, is not immune to export losses.

Salena Estate Wines owner Bob Franchitto said he was concerned about more than just tariffs to China.

“In the end, it was a hundred million liters to China but the Australian wine industry had more than a hundred million liters of trouble,” said Mr Franchitto.

The Wine Australia report highlights growth in Singapore, the United States, Malaysia, Thailand, India and New Zealand.

“Every market is worth pursuing but this market will not replace what has happened with China,” Franchitto said.

He said COVID had a bigger impact than Chinese tariffs.

“We’re looking into other markets and we’ve started supplying a little bit to the US, and we’ve got orders to Japan and Malaysia it looks like there’s an opportunity for us,” he said.

“But they will not overnight pick up the lost slack between COVID and China.”

Franchitto said it might take three or four years for the wine industry to recover.

Bob Franchitto said wine exports have struggled this year.(Provided: Salena Estate)

Franchitto said continued shipping delays were causing more pain for winemakers.

“At the moment trying to ship wine has become very difficult,” he said.

“You know you get an order, you get an order, you’re ready to ship and suddenly your container is cancelled, your ship is cancelled … it’s delayed so everything seems to be taking longer.”

Australian Wine and Wine chief executive Tony Battaglene said the Australian wine industry would suffer more in the years to come with oversupply issues.

“We have full tanks … and we can’t get wine offshore because the logistics of shipping are very complicated, so I think we’re going to have a situation next year where it’s going to be very difficult for farmers,” Battaglene said.

“That means there’s going to be a lot of pressure on wine prices next year and the year after – I’d say for another 24 months maybe 36 months there will be some of them that might not survive.”

He said it was the hardest time he had seen in his 24 years in the industry.

“I think it’s a contracting cycle and I think it’s going to take a long time to bounce back because COVID is generating issues around shipping, inflation, labor shortages – there’s no quick solution to these problems,” he said.

Despite some positive signs in some markets, Battaglene said they could not be as big as the Chinese market.

“The market is coming in very well, we are making good progress especially in South Korea as well as Hong Kong, Singapore and Thailand,” he said.

“India is a long wound, it will take time.”

He said the industry had some good wins in the recent announcement of free trade agreements.

“But realistically it will be some time before we see progress in that market.”

Get the latest rural news

#wine #market #emerges #Chinas #decline