Australian wine’s home ground advantage

29 May, 2019 by Andy Young

By Sandy Hathaway, Industry Analyst, Wine Australia

According to Wine Intelligence, Australia is the world’s tenth most attractive wine market. Wine Intelligence analyses wine markets based on a number of economic and wine-specific measures. The measures are given a score and weighted according to their significance.

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Australia scores relatively highly on GDP (gross domestic product) and GNI (gross national income) per capita and is sixth in the world on the StarMac index (a proxy for a globalised economy). In terms of wine market measures, it is particularly strong on wine consumption value.

International Wine and Spirit Record (IWSR) data shows that Australia is the tenth largest wine consuming country in the world and ranks eighth for per capita consumption. Importantly, it is a relatively high value market, with the eighth highest average value for still wine of the top 20 wine consuming countries.

Australia has also been part of the global premiumisation trend in mature markets, with value growth exceeding volume growth as consumers switch to higher value products.

On the downside, like most mature wine markets, Australia has declining per capita consumption and low population growth, leading to an overall decline in market volume. Recent Wine Intelligence research found that the overall number of regular wine drinkers in Australia has decreased by 10 per cent, and the number of weekly wine drinkers has dropped from 8.5 million in 2010 to 7.4 million in 2018.

Confirming this trend, the volume of wine sold in the off-trade in Australia in the year ended February 2019 declined by 0.6 per cent (IRI MarketEdge).

Local vs imported wine in the domestic market

These characteristics of the market apply to all wine producing countries looking for sales opportunities. However, for Australian wine, the Australian market has a number of specific advantages.

It is stating the obvious to note that consumers speak the same language and share a common culture with the wine producers, the freight distance is shorter than to any other market and there are zero tariffs on Australian wine in the market.

Most importantly, Australian wine has an 83 per cent share of the market. Australia does not dominate any other market in the same way. Apart from New Zealand (where Australian wine has a 73 per cent market share) the next highest market share is Malaysia, where Australia has a 37 per cent share.

In the on-trade, the share of imported wine is higher than in the off-trade. Statistics from eBev (a wine sector trade portal and digital marketplace for on-premise) indicate that imports make up 34 per cent of on-premise wine orders, while in the off-trade it is 16 per cent of wine sales by volume (IRI MarketEdge 2019).

Not only does Australian wine in general have a home ground advantage, but individual states demonstrate a relative preference for locally produced wines in both the on- and the off-trade.

Research by Wine Business Solutions , looking at wine listings, shows that imported wines are particularly popular in the eastern states, while all states offer something of a ‘home ground advantage’ to listings of wine from their local wine regions.

Analysis of off-trade wine sales using IRI MarketEdge data shows that there is a particularly strong home ground advantage for Tasmanian, South Australian and Western Australian wine in their own states, at the expense of imported wine. In the markets with limited local production, the Northern Territory favours wine from New South Wales, while Queensland has the highest share of imported wine.

This column was first published in the May issue of National Liquor News.