Premiumisation of Australia’s wine exports continues

24 July, 2019 by Andy Young

The premiumisation of Australia’s wine exports has continued to grow in the 12 months to June 2019, with value increasing by four per cent, while volumes have decreased by six per cent.

The value of Australian wine exports is now $2.86bn, with China continuing to drive growth and the United States returning to growth. The decline in volume, to 89 million nine-litre case equivalents was driven by a decrease of 7 per cent in shipments of wine below an average value of $2.50 per litre free on board (FOB). This resulted in a 10 per cent increase in the overall average value of exported wine to $3.58 per litre, the highest level since 2009.

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Wine Australia CEO Andreas Clarke said the growth in value and fall in volume reflected the work done by the Australia wine sector in focusing on growing value over volume.

“The strong growth in average value is positive for the wine sector and the broader economy as it lifts returns for wine businesses and flows through to regional economies through higher grape prices. Our National Vintage Report 2019 released last week shows that the average grape price has lifted for the fifth year in a row, reaching $664 per tonne, the highest level since 2008,” Clark said.

“The turnaround in exports to the USA, which grew by two per cent in value to $432m, is pleasing. Average value increasing six per cent to $2.83 per litre, the first growth in two years, rewards the efforts of the many exporters who are working actively in that market to change perceptions about Australian wines and communicate about the diversity and excellence of Australia’s offering.

“There were increases across most major price segments in the USA with the stand out segment for growth being $7.50 to $9.99 per litre FOB.”

The strong efforts to grow Australian wine in China have also been rewarded with a seven per cent increase in value to $1.2bn. Additionally the first five months of 2019 have shown that Australia has overtaken France to become the number one imported wine category in mainland China by value. Australia’s imported market share has jumped 13 percentage points since 2015 to 24 per cent based on volume; compounded by the recent contraction of the total import market.

In the UK both value and volume declined by three per cent and four per cent respectively, which Wine Australia said reflects that some of the larger brands have wrapped up their strategies of getting additional product into market pre-Brexit to mitigate any disruption to exports.

“It’s important to retain perspective on the UK market. Research by IRI shows Australia was ranked number 1 in still wine off trade [retail] sales in the 12 months ended March 2019, with a market share of 24 per cent in volume and 23 per cent in value,” Clark said.

Clark added that Australian wine supplies would remain tight in the medium term with last week’s National Vintage Report revealing that the 2019 vintage was 1.73 million tonnes, just one per cent below the 10-year average. This means that supplies, particularly of reds that dominate Australian exports, will continue to remain stable.