What’s really happening with wine sales in Australia?
This column was submitted by Sandy Hathaway, Industry Analyst at Wine Australia, for the March issue of National Liquor News.
If you’ve been following the headlines recently, you might conclude that Australian wine is a threatened species in the domestic market. The latest Roy Morgan Alcohol Consumption Currency Report (September 2018) reported that there had been a decline in the proportion of Australians drinking wine, while millennials in particular – the marketers’ target group of choice – apparently think wine is boring. The Australian Bureau of Statistics (ABS) recently reported that there was a 1.9 per cent decrease in wine prices in the December quarter compared with the previous quarter, despite the overall CPI increasing by 0.5 per cent.
However, these snippets do not reflect the total picture. For example, the ABS figures relate to a standard ‘basket of goods’ and therefore indicate only that the same wine products have had a small decrease in price (which incidentally came after a 1.3 per cent increase in the previous quarter).
The Roy Morgan report shows that over the past five years there has been a small increase in the percentage of the population that does not drink any alcohol ‘in an average four-week period’. However, that does not have any direct bearing on the amount of alcohol that the non-abstaining adult population drinks; nor does it take into account overall population growth, which would increase the actual number of people consuming alcohol.
In fact (also according to the Roy Morgan report) nearly half of the adult population in Australia (43 per cent) drinks wine in an average four-week period – making wine the most popular alcohol category. According to IRI MarketEdge (December 2018), wine increased its share slightly to 20 per cent of the total alcohol market in the year ended 2 December 2018.
According to Wine Intelligence (2018), regular wine drinkers are also spending significantly more in both retail outlets and on-premise than they were two years ago. This applies particularly to the younger age groups, who may not drink as much but are willing to spend and experiment more.
Figures from IRI MarketEdge show that value growth in wine has been around three to four per cent in the past several 12 month periods while volume has been flat, pointing to ‘premiumisation’ in the domestic market – i.e. a trend towards drinking less but higher value products.
The clear majority (84 per cent) of wine consumed in Australia is Australian-made, according to Wine Australia’s Australian Wine: Production, Sales and Inventory report 2017-18. The report, which is based on an annual survey of Australian winemakers, found that while domestic sales declined by one per cent in volume, the value to winemakers of these sales increased by six per cent, while the average value increased by seven per cent. This may reflect an increase in margins to winemakers, an increase in retail prices and/or a change in the mix of sales channels, with more sales being made through high value direct-to-consumer channels such as the cellar door and wine clubs.
The report also found that Australian wineries sold more wine than they produced in 2017-18, due to strong growth in export markets. While there is no room for complacency, the biggest threat to Australian wine in the short-term is more likely to be lack of supply than lack of demand.