Region InFocus: Australia
Australia is now the world’s fifth biggest exporter of wine, behind only France, Italy, Spain and Chile. While it may be trailing those countries in terms of absolute export figures, last year it outstripped them all in terms of rate of growth, with exports up by 10% or A$201m in 2016/ 2017 to reach A$2.31bn, driven by strong growth to China and the US.
And it is in the premium sector where the strongest export growth occurred, with all price segments above A$10 per litre FOB experiencing growth.
The star performing category was amongst those wines priced between A$30 - A$49.99 per litre, which soared by 70% in the year. The second best performing price bracket was wines costing between A$100 - A$199.99 which saw exports jump by 43%, while those priced in excess of A$200 saw a 32% increase.
At the other end of the price spectrum, exports of wines in the A$7.50 - A$9.99 price bracket dipped by 5% last year, and those between A$2.50 and A$4.99 only saw a 2% increase.
Australia’s bulk story
Since 2012, Australian bulk wine exports have exceeded bottled, with exporters choosing to send wine in bulk to then bottle in market increasing significantly in the past five years.
A strong Australian dollar, the presence of buyers-own brands, particularly in the UK and a tight supply situation in the US are three key drivers.
Around 80% of Australian exports to the UK and Germany were shipped via bulk containers in the past 12 months, while bulk shipments to the US increased, with more than 75% of bulk wine exports to the US being Australian brands bottled in market.
However, the proportion of Australian wine shipped in bulk has actually dropped slightly in the past two years. Two factors are at play here; a greater percentage of wine sold in the burgeoning Asian markets is bottled in Australia, and a lower Australian dollar is making it more economical to package in Australia.
The average value of Australian bulk wine exports has remained below A$1 per litre FOB for the past two years, reflecting large vintages from the big European producers, particularly Spain. In 2015/2016 Spain exported 1.3 billion litres of bulk wine at A$0.56 per litre – to put this in context, Australia’s total output in 2016 was 1.2bn litres.
Bulk by region
Overall exports of both bulk and bottle wines to most regions grew in 2016/2017 with the exception of Europe, where sales declined by 1% to A$586m, and to Oceania which also saw a 1% drop to A$87m.
However, shipments to north east Asia jumped by 29% to reach a record A$797m, while south east Asia was the second biggest growing region with exports jumping 14% to reach A$162m, also a record sum for Australian exports.
Sales to the US increased by 3% to A$464m – the highest value since 2011/2012, with the overall increase in value driven by white wine exports, up 3% to A$181m, and carbonated wine (mainly Moscato) increasing 10 fold to A$11m in value.
Exports to the Middle East climbed by 18% to a high of A$22m.
UK number one
The UK, meanwhile remains the top destination for Australian exports by volume, with more Aussie wine shipped to the UK than any other market.
Overall the total value of exports to the UK dropped by 7% to A$341m, though there was very strong growth in exports in the premium sector; wines priced above A$10 per litre FOB grew by 13% to A$28m.
Booming demand in China
But it is exports to China which have been at the hub of Australia’s wine export growth. In 2016/2017, shipments to Greater China, which is the top destination for Australia’s wine exports were up by a third to A$721m, while the implementation of the China-Australia Free Trade Agreement (ChAFTA) at the end of 2015 has boosted an already booming market.
Bulk wine exports more than doubled to A$37m, though bulk wine only accounts for 6% of total shipments from Australia. Bottled wine exports also grew strongly, up by 41% to A$568m, representing a 94% share of the total value of wine exports to Mainland China.
Over the same period, exports to Hong Kong dropped off by 8% to A$114m, while volume nosedived by 15% to 8 million litres. However, the average value of exports to Hong Kong increased by 8% to A$13.88 per litre FOB, with Hong Kong enjoying the highest average value among the top 50 destinations to which Australia exports. Over three quarters (77%) of exports to Hong Kong from Australia are valued at A$10 or more per litre FOB.
Shiraz is top varietal
Shiraz was the top varietal exported by Australia, with shipments up by 15% last year to reach a value of A$531m. This was followed by Cabernet Sauvignon, where exports were up by 11% to A$293m, Chardonnay, which experienced export growth of 7% to hit A$178m, Shiraz/Cabernet Sauvignon blend up 14% to reach A$133m and Merlot, with shipments up by 6% to a value of A$106m.
The US remains the biggest destination in the world for Australian Pinot Grigio exports, accounting for over three quarters of the category’s shipments. Pinot Grigio exports grew by 16% to A$24m last year.
Australia’s 2017 vintage, a summary:
• The total Australian vintage weighed in at 1.93m tonnes, a 5% increase from the 2016 crush of 1.807m tonnes.
• Grape prices were up by 7% compared to the previous year, reflecting continued and robust demand driven by China.
• Crush tonnages in warmer inland regions increased by 3% in 2017. Export demand drives these regions and grape prices responded by increasing 10%.
• Crush tonnage in cool/termperate regions increased by 9% in 2017. A generally very wet winter and spring led to the expectation of increased crops and grape price increased ·
• Tonnages of red varieties increased by 12% and red grape prices increased by an average 6% across all regions, compared to last year.
• Tonnages of white varieties decreased by 2% and white grape prices also increased an average by 6% across all regions, compared to last year.
• The top 5 varieties accounted for 71% of the total crush in 2017. Changes in tonnages of the top 5 major varieties from 2016 are:
• Shiraz +15%
• Chardonnay -13%
• Cabernet Sauvignon +8%
• Merlot +10%
• Sauvignon Blanc +4%
* All figures supplied by Wine Australia.