Australian wine sales outstrip supply for third consecutive year

Australian wine sales have outstripped supply for the third consecutive year, with severe drought and wildfires in some parts of the country exacerbating the situation last year.

This has resulted in the lowest ratio of stock to sales for nine years and increasing wine grape prices according to Wine Australia’s Wine Production, Sales and Inventory Report 2020. Total Australian wine production for the year 2019 – 2020 at around 1.1bn litres was  9% lower than the previous year’s yield, and a full 10% below the ten year average.

As of June 30th 2020 the total inventory of Australian wine within Ausralia was estimated by be in the region of 1.7bn litres, down by 4% on the previous year. dHowever, Andreas Clark, Wine Australia’s CEO, said this came as no surprise, as the 2020 crush at 1.52m tonnes was the lowest in 13 years.

“While quality was generally high in 2020, it was a challenging vintage, with drought conditions affecting much of Australia and bushfires affecting a small number of wine regions”, he said. The total volume of Australian wine sales in 2019 to 2020 was just over 1.2 billion litres (136 million nine-litre cases), of which the bulk (60%) was destined for overseas markets, while the remaining 40% was sold in the domestic market. Domestic sales were down by 1%, while exports dropped by 9%.  

However, the report was compiled before China started imposing hefty tariffs on bottled wine exports, introduced in November 2020. In the year since then, exports dropped in value by 1% to $2.89bn, as the swingeing tariffs of up to 212% hit home.

Meanwhile, Clark said the drop in sales in the domestic market was in line with the long-term trends of more moderate drinking and premiumisation in established wine markets, while the drop in exports was consistent with the lower vintages in 2018 and 2019. The Covid-19 pandemic had not had a “substantial impact” on overall sales during the period of the report, he claimed.

"Covid-19 only began to make its presence felt in most countries during the fourth quarter of 2019–20, and while it caused major disruptions to sales channels, overall consumption seems to have been relatively unaffected.’

Despite sales decreasing overall by 6% compared with 2018–19, sales still exceeded the volume of wine and other grape products produced by over 60 million litres. As a result, Wine Australia estimates that stocks of Australian wine and other grape products have fallen by approximately 70 million litres (4%) to 1.7 billion litres, the lowest since 2011–12. “

"The past three years have seen growth in demand and falling production, leading to reduced volumes available for export and declining stocks’," Clark said. "This period of undersupply has seen winegrape and wine prices strengthen, which is good news for grapegrowers and winemakers."

The overall inventory reduction was largely driven by a 100 million decrease in white wine, which was partly offset by increases in red, sparkling and fortified wines. For the past two years, the white share of total sales has exceeded its share of production, causing its stock-to-sales ratio to fall in 2019–20 to its lowest level in 10 years.

“The results of the survey have highlighted a significant challenge for the sector going forward: to balance supply with the demand opportunities”, Clark said.  “This is particularly important as wineries look to divert exports away from China, which predominantly bought our red wine, to other markets such as the USA and the UK, which have a higher demand for white wine.”

Photography: Dan Freeman