A challenging year for the export of Australian wine, as value plummets

The value of Australian wine exports dropped by 4% to AU$1.94 billion during the year 2022, with sales in the UK falling by 18%; however, volume increases of bulk wine exported to the United States and Canada helped push volume growth by 1%.

Wine Australia’s 2018 Export Report dubbed it “another tough year for Australian wine exporters, with rising inflation, business costs and interest rates hurting margins”, and said it was probable that this would continue in 2023.

Four of Australia’s top five markets by value saw exports fall, with the US, which contributes for 20% of the overall value share, down 3% to $390 million, and the UK (19% of total export value) down 18% to $373 million on volumes down 11%. The typical value of exports from the United Kingdom fell as well, falling by 8% to reach $1.72 per litre FOB.

Wine Australia highlighted that exports to the UK have been “unpredictable” since Brexit was announced in 2016, and there have been various peaks and troughs since then. It pointed to the uplift during Covid due to Australia’s top position as the UK off-trade, and the subsequent “counter-swing” in demand when the on-trade reopened; however, it also noted that Australia had seen a smaller reduction of 4%, compared to the total off-trade market decline of 8%; this was due to Australia’s top position as the off-trade in the UK (IRI Worldwide).

However, Canada, which accounts for 10% of the total export value, grew 14% to $188 million, with volumes up 46% to 68 million litres, or 11% of the total export volumes. Hong Kong and Singapore also had value drops, of 13% and 20% respectively (to $167 million and $132 million respectively).

The United States of America is the second largest volume market in the world, accounting for 23% of the total export volumes, and its volume growth outpaced its value increase by 13%, reaching 140 million litres. The number of businesses that exported to the United States reached 303, an increase of 5% over the previous year and the highest level seen since 2008.

In the meantime, Australian wine exports to Europe fell by 16% to $586 million, with Germany (down 2% in value to $38 million), the Netherlands (down 19% to $29 million), and Denmark (down 13% to $37 million) being the countries with the worst declines.

Although all markets in the region increased, Singapore, the region’s largest market and a major trading hub, saw a decline of 20%, resulting in a loss of $132 million in revenue, despite the fact that there was an increase in shipments to Southeast Asia, with a value increase of 16% to $305 million. This increase was driven by Thailand and Malaysia.

In the meantime, value sales in Northeast Asia were down by 10% to $314 million, while volumes were down 15% to 32 million litres. The declines were driven by China and Hong Kong, but 8% value growth in Japan helped counterbalance the declines. China and Hong Kong led the declines in volume. The market reached $51 million, mostly driven by exports of wines above $10 per litre, while the number of exporters also climbed by 23% to 260 in 2022.

Advancements made in shipping

One positive aspect was the improvement to global shipping challenges that have plagued the business since 2021. According to Peter Bailey, manager of market analytics for Wine Australia, this improvement had contributed to a rise in unpackaged wine exports. The problems had plagued the industry since 2021.

“Shipments of 2021 and 2022 vintage wines had been significantly delayed due to the shipping issues, particularly unpackaged shipments. As these conditions alleviated in the later half of 2022 in some locations, Australian wine growers were finally allowed to export their wines to customers overseas,” he stated, although he cautioned that delays are still being recorded along certain trade routes.

This increased share of unpackaged wine shipments was, however, a contributing factor in the decline of the total value of exports. This is due to the fact that unpackaged wine is shipped at a lower average free-on-board value than packaged wine because the costs associated with packaging are not taken into account.

This increase in bulk wine fueled growth not just in the United States but also in Canada, with volume increasing by 67% to 76 million liters in the United States and by 8% to 44 million liters in Canada respectively. Packaged shipments at the higher end of the price spectrum also increased in both markets. The value of exports to Canada valued at $5 per litre or more increased by 13%, reaching $114 million, while exports to the United States valued at more than $10 per litre increased by 4%, reaching $50 million.