China now our best wine export market

China now our leading wine export market


Mainland China has outstripped the United States as the leading destination for Australian wine exports.

 Australia's 1743 active wine exporters sold 10pc more wine in offshore markets to achieve export sales of $2.17 billion for in the past year.

Australia's 1743 active wine exporters sold 10pc more wine in offshore markets to achieve export sales of $2.17 billion for in the past year.

Mainland China has outstripped the United States as the leading destination for Australian wine exports for the first time, with the soaring industry-wide sales momentum providing a further boost for Penfolds owner Treasury Wine Estates.

Exports by Australian wine producers to China jumped by 51 per cent to $474 million in the 12 months to September 30 overtaking the US, which increased by 4pc to $448m.

Momentum has been strong in the past three months.

Industry body Wine Australia said it was the first time mainland China had surpassed the US figure.

Wine Australia chief executive Andreas Clark said 10 years ago Australian wine exports to China were valued at just $27m.

Treasury Wine Estates, led by its big brands Penfolds and Wolf Blass, is both a driver and a beneficiary of the big jump in exports to China.

Its share price has almost doubled in the past 12 months to $11.49 on booming demand in Asia, where its profit margins are a handsome 34.8pc compared with the US where they sit at 13.8pc.

Treasury's total sales to Asia from all of its brands for 2015-16 were $293m, up from $208m a year earlier.

But while the China market is accelerating fast, the Brexit wobbles and a much larger skew to lower-priced bulk wine meant the value of exports to the United Kingdom slipped by 3pc to $361m for the 12 months to September 30.

Accolade Wines, which is preparing for an ASX listing in early 2017 as private equity owner CHAMP Private Equity sells out, has a large business in the UK where one of its major brands, Hardys, is the number one wine brand in that market.

It has large sponsorship deals with English cricket after a deal struck with the England and Wales Cricket Board.

A mid-sized listed Australian wine company, Australian Vintage, which makes McGuigan, Nepenthe and Tempus Two, suffered a $1m hit from the Brexit vote after the value of the British pound tumbled.

Across all of Australia's 1743 active wine exporters, the value of wine sold in offshore markets increased by 10pc to $2.17 billion for the 12 months.

Much of the value growth across the marketcame from higher-priced wines as Australia tries to shift further up the price scale. Treasury chief executive Mike Clarke is repositioning the Penfolds brand in Asia as a luxury product.

Hong Kong is the fifth-largest Australian export market, up 7pc to $126m.

Shiraz is the leading wine variety exported from Australia, with sales of up 20pc to $488 million, followed by cabernet sauvignon, up 17pc to $276m.

Chardonnay is third, but its sales dropped by 1pc to $164m.

The much maligned merlot, whose unfashionable appeal was in the spotlight in the 2004 movie Sideways which featured a lead character played by actor Paul Giamatti who refuses to drink merlot, increased by 5pc to $97m.

  • This article appeared first in the Australian Financial Review

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