The Australian wine industry's hopes of revving up sales to US consumers face big challenges as Americans adopt more sober habits and coronavirus and global trade wars undermine prospects in the key marketplace.
Our biggest market, China, is also looking unwell, despite Australia rising to become China's biggest source of wine imports last year.
A report on global markets from Rabobank has described consumption growth in the US wine market as "tepid".
The slowdown was partly attributed to younger consumers dramatically reducing alcohol consumption as part of a broader "sober-curious" movement.
US sobers up
Total US beer sales fell more than one per cent last year and wine basically flatlined at less than 1pc growth.
However, the trend for distilled spirits was not nearly so temperate, growing almost 5pc at the expense of other alcoholic drinks.
Together China and the US account for about 20pc of global wine consumption and drove about half the wine market's demand growth in the four years to 2018.
Rabobank warned tariff disruption and trade disputes were now here to stay, and while they may not affect absolute wine volumes consumed, they would trigger a reshuffle in global trade.
Australian wine producers needed to embrace new marketing and sales strategies to overcome slowing consumption in key markets.
"Clearly wineries need to re-think strategies to reach the emerging consumer," the agribusiness lender warned.
Although the value of Australia's industry was rising each year, with recent booming wine prices in China helping balance the falling US consumption trend, disruption caused by coronavirus was now wreaking havoc in Australia's largest wine market.
Last year China accounted for a massive $1.3 billion of Australian winemakers' total exports of $2.91b, and the US was worth $419m.
Britain actually drinks the most Australian wine of our overseas markets - almost 25m standard 12-bottle cases (nine litres/case).
However, Wine Australia reported the UK only paid $352m last year, to rate as our third biggest export customer by value.
Rabobank senior wine industry analyst, Hayden Higgins, tipped the global wine trade to face significant uncertainty throughout 2020.
A major element affecting the global wine industry in recent months has been stagnant domestic demand in the US, but now we are also seeing a shutdown in China due to COVID-19
In addition to coronavirus' impact on recent sales activity, trade tensions between the US and China, Brexit negotiations and other trade agreement talks had all impacted on sales and export volumes last year, and that would continue in 2020.
Mr Higgins said the first half of this year would be especially challenging for Australian exporters because of the hit to Chinese sales.
"A major element affecting the global wine industry in recent months has been stagnant domestic demand in the US, but now we are also seeing a shutdown in China due to the COVID-19 outbreak which is adding to the slowdown in Chinese wine imports experienced in 2019," he said.
"The outbreak is not only affecting actual consumption and trade flows of all goods, including wine, its economic consequences may undermine demand for wine even after the disease subsides."
Values up, volumes down
Rabobank's latest wine quarterly report noted Australian bulk exports fell 12pc last year, but lifted 3pc in value.
Total exports of bottled wine were also down 5pc, but sales were worth 7pc more.
In fact, wine priced above $20/litre jumped in value on 2018 prices by almost a third.
Reflecting the overall export trend, Chinese sales grew in value by 12pc while volumes dived 17pc to 15.8m nine-litre cases.
In the US, where Australia last year launched a big "Far from ordinary" promotion roadshow to help reinvigorate exports, the value of our sales slipped 1pc and volume was down 14pc to 15.3m cases.
Unfriendly trade winds
Attractively priced Chilean and Argentinian wines were likely to intensify competition challenges in the US this year, Rabobank said.
Meanwhile sales volumes to Australia's other top markets, the UK, Canada and Singapore were also all down by 9pc, 13pc and 18pc respectively last year, with only Singapore rising in value (18pc) to $105m.
Mr Higgins said US tariffs on selected EU wine sales in America, introduced late last year, could reverberate worldwide, destabilising markets which already had ample inventories and slow trade.
The traditional focal point of most wine marketing - wine scores, tasting rooms, vineyard soil quality, and so on - seem to be less relevant for the younger generation
While there were concerns about the impact that persisting drought may have in southern hemisphere harvests, the abundance of global stock, particularly of red wines, and uncertainties about demand were keeping prices "in check".
Rabobank's report found it was imperative the industry quickly identified ways to boost consumption in other key markets and broaden its appeal to attract new consumers.
"The traditional focal point of most wine marketing - wine scores, tasting rooms, vineyard soil quality, and so on - seem to be less relevant for the younger generation," it said.
"With sales growth slowing, the industry will need to take bold action to find new ways to engage the market and connect with an evolving consumer.
"This will require investments to build out e-commerce capabilities and improve brand-building skills to help reach a consumer that engages brands differently."
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