Australia's exports to UK and Hong Kong surge, but fail to compensate for loss of Chinese market
Australian wine exports to the UK rocketed by 40% in the first half of the financial year, though this still did not compensate for the loss of the Chinese market, caused by the crippling tariffs imposed on imports last November.
The value of exports to the UK rose 23% to $472m during the whole year, while volumes increased 16% to 269 million litres (30 million nine-litre case equivalents), making the UK the biggest destination by volume and the second by value.
Sales to Hong Kong also leaped, taking up some of the slack from the redundant Chinese mainland market, with shipments up by 111% in the 12 months ending June 30th, to A$187m, compared to a steep 45% drop in shipments to mainland China, according to Wine Australia’s latest export report.
The Hong Kong market pales in comparison to the mainland, with China remaining Australia’s largest market in value terms. However, Hong Kong has now jumped into fourth position, up three places from a year ago.
Overall, Australia’s overseas shipments declined by 10% in value to $2.56bn compared to the previous financial year, with most of the damage sustained in the first half as Chinese shipments nosedived a dramatic 97% to a mere $13m. Volumes, meanwhile, were down by 5% to 695m litres.
The average price per litre for exports, meanwhile, dipped by 5% to $3.69 FOB. Wine Australia’s general manager corporate affairs and regulation Rachel Triggs attributed the decline in exports to the effective closure of the Chinese market, along with the cumulative impact of three consecutive lower vintages in 2018, 2019 and 2020, meaning there was less wine to export.
“Exports increased to the UK, Singapore, South Korea, Malaysia, Taiwan and Hong Kong by a combined $240m, but they did not offset the decline in exports to mainland China,” she said. “However, excluding mainland China, exports increased by 12% in value to $1.96bn and increased by 6% in volume to 643m litres.”
The decline in the overall average value was down to a reduction in the share of bottled exports, which last year accounted for 39% compared to 45% in 2019/2020, largely as a result of the loss of trade to China, which was dominated by bottle sales, as well as an increase in exports to the UK which imports 87% of Australian wine in bulk and then packages it in market.
The most significant growth came from shipments to Europe, which posted an 18% increase in sales to $724m, the highest value achieved since 2010/2011. South East Asia also grew by 14% to $207m, while Oceania saw sales growing by 4% to $107m. However, the growth to these regions was offset by the decline in shipments to Northeast Asia (including China), where exports slumped by 29% to $909m, while North America also saw a falling off of sales, down by 5% to $586m.
In the UK, growth in exports was stronger in the first half of the year, which Wine Australia said was due to increasing wine sales in the off-trade while the on-trade was off limits due to Covid- related shut downs. Additionally, some exporters had shipped wine into the UK ahead of Brexit. Growth in the second half of the year was much lower, though Q4 (up 10%) was stronger than Q3 (up 6%).
In mainland China, shipments of Australian wine dropped off a cliff edge, with total exports for Q 3 and 4 in 2020/2021 crashing to a mere $13m, down from $419m in 2019/2020 before tariffs were imposed.
The US too saw declining sales, down by 7% to $400m and by 8% in volume to 127m litres. However, the average value of wine shipped inched up by 1% to $3.13, the highest since 2008/2009. The bulk of the decline in sales to the US occurred in Q4 with value dropping by $31m compared to the same period in 2019/2020, and is a result of several factors.
There was a substantial increase in exports in Q4 in 2019/2020 which reflected a Covid related surge in off-trade sales in the US when the on-trade was closed for business. This year, however, with the on-trade open again and the off-trade returning to a more normal level of activity, there was a counter swing and as a result, exports dipped. Also, some exporters simply had less volume available for export, and this was most apparent in Q4 as stock levels were not albe to support growth.
During the year the value of wine exported in glass bottles dropped by 15% to $1.96bn, and volumes decreased by 17% to 271m litres, translating as a 3% increase in the average value of botled exort sto $7.26. Unpackaged wine exports over the same period increased by 11% to $577m and increased by 5% in volume to 417m litres, with the average price of bulk wine increasing by 6% to $1.38 per litre.