Wine exports surging as worldwide shortage looms

Cheap wine era ends as Aussie exports soar and European output slides


Agribusiness
Total Australian wine volumes sold overseas grew nine per cent to 799 million litres in the past year.

Total Australian wine volumes sold overseas grew nine per cent to 799 million litres in the past year.

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Drought has scorched winegrape production in France, Italy and Spain where half the world’s wine is made

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Australia’s long run of wine production oversupply and cheap retail prices are on track to evaporate if current global shortages and export market trends are any indicator.

North Asia and North America are uncorking big sales results for Australian wine exporters, with China, in particular, recording huge growth.

Australian exports to China, Hong Kong and Macau jumped 42 per cent in the past year to be worth $835 million, with mainland China alone drinking 57pc more Australian wine, worth a total $739m, in the past year.

That’s well ahead of our next biggest market, North America, which grew 7pc to $646m.

Overall exports for the year to September 30 climbed 13pc to be worth $2.44 billion.

The latest export results come as Rabobank researchers tip world wine stocks will be at least at 10 year lows in 2018.

France, Spain and Italy will likely see production fall between 10pc and 20pc - Stephen Rannekleiv, Rabobank

Europe’s wine grape crop has been hit hard by frosts, heat, hail and drought and global inventories are already tight.

In particular France, Italy and Spain, which represent half the world’s annual production, have suffered adverse weather resulting in European production shrinking by the equivalent of 8pc of global consumption.

This year’s French winegrape harvest could be the smallest since 1945, according to some industry analysts.

“While no official numbers are in, each of these three countries will likely see production fall between 10pc and 20pc,” said Rabobank’s global beverages research strategist, Stephen Rannekleiv.

Meanwhile, Argentina –  the world’s fifth largest wine producer –  recorded its second successive poor harvest and wildfires have caused significant damage to US vineyards and wineries in California.

Australia’s total wine volumes sold overseas grew 9pc to 799m litres in the past year.

The average overall value of our wine exports has climbed to its highest price in eight years - $3.06 a litre free on board (FOB).

Bottled export values lifted 1pc to average $5.53/l, while bulk exports reflected rising demand for lower priced wine, up 3pc to $1/l.

Rabobank has predicted current seasonal setbacks overseas will lead to inevitable rises in the price of grapes and bulk wine, most notably in Europe.

New exporters rush in

Wine Australia, chief executive officer,  Andreas Clark, said both established and new-to-market exporters had shared in Australia’s strong export growth surge.

He said a record 2102 active exporters sent product overseas in 2016-17 up from 1744 the year before.

Of these, 1475 experienced about 28pc growth in exports to average sales worth about $2 billion.

“This growth reflects increasing demand for premium Australian wines in most regions around the world, where consumers are trading up to higher value products across a range of categories,” Mr Clark said.

Wine Australia chief executive officer,  Andreas Clark.

Wine Australia chief executive officer, Andreas Clark.

Red wine varieties were a big winner, accounting for 74pc of export value and also outperforming white wine domestically.

Australian reds, particularly shiraz, were especially in favour with the Chinese.

Exports of white wine also grew, but at a much lower rate of 2pc to $546m.

On the domestic front premium sales of Australian wine also continue to grow.

According to IRI MarketEdge Liquor, the value of Australian wine’s domestic sales worth $10-plus a  bottle lifted 7pc compared to a 0.3pc for wines worth less than $10/bottle.

China free trade deal helps

Exceptional growth in the China market has been attributed to rising consumer demand and reduced tariffs as a result of the China–Australia Free Trade Agreement, which have encouraged exporters to ship directly to mainland China instead of Hong Kong.

Also, as logistics and route-to-market practices evolve, some products are being sent earlier to market.

However, the UK still represents Australia’s top wine market by volume, taking 28pc of our exports, followed by the US (23pc) and mainland China (17pc).

A tougher exchange rate climate, has however, eroded the  value of exports to the UK by 3 per cent to $349m as winemakers had to compete with more discounted rival brands on British supermarket shelves when the Brexit vote sent the pound sliding.

Australia’s five largest markets account for 76 pc of the value of all exports.

The top five markets by value were mainland China, which accounted for 30pc of total export sales value, the US (19pc), the UK (14pc), Canada (8pc), and Hong Kong (5pc).

Rabobank’s Mr Rannekleiv said production shortages overseas would inevitably see global wine consumption in 2018 fall, with the decline expected to be felt mostly in the lower-priced tiers.

He noted Australian exports of bottled wine not only increased to, China, but also to the UK, the Netherlands, and Germany, even though the average price/litre was down for all these markets.

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