Exports with an average value above $10 per litre hit $1 billion milestone

In the year ended September 2019, the value of Australian wine exports increased by 7 per cent to $2.89 billion free on board (FOB), while volume declined by 8 per cent to 774 million litres (86 million 9-litre case equivalents). Average value increased by 16 per cent as a result, to $3.74 per litre, the highest level since mid-2008. This exceptional result in average value is driven by record-setting growth in exports above $10 per litre, which offset decreased shipments below $5 per litre.

The decline in the overall Australian export volume is due to a combination of factors:

• Australia’s 2018 and 2019 vintages were smaller than the record-breaking 2017 vintage, meaning there is relatively less supply available for shipping overseas
• international supply pressures have eased with a larger 2018 global vintage, increasing competition in the market, and
• the premiumisation and moderation trends in established wine markets are putting downward pressure on volume and lifting average values.

There was growth in all price segments above $5 per litre (see Figure 1), reflecting the increasing global demand for premium Australian wine. Wine shipped at an average value of $10 per litre and above reached record levels for both value and volume. Total value passed the $1 billion mark for the first time, increasing by 30 per cent from the previous year, while volume increased by 27 per cent to 45 million litres.

The decline in exports below $2.50 per litre was evident in both unpackaged and bottled wine, while the decline in exports between $2.50 and $4.99 per litre was driven by bottled wine. However, a 56 per cent increase in the value of bulk wine in this segment served to lessen the impact of this decline.

Figure 1: Exports by price segment (million AUD FOB)

Exporter performance

There were 2797 companies exporting wine in the year ended September 2019, a 16 per cent increase from the previous year.

There are 52 exporters in the largest category, making up 2 per cent of total number of exporters, who contributed 71 per cent of the value and 87 per cent of the volume, while the smallest exporters (2519) make up 90 per cent of exporters, but only contributed 16 per cent of the value and 6 per cent of the volume (see Figure 2).

Figure 2: Export value and volume by exporter size

The 2797 current exporters are roughly split into thirds by those in growth (35 per cent), those in decline (32 per cent), and those who started exporting during the 12-month period (33 per cent). The 1890 companies that started exporting or increased their level of exports contributed $505 million to the growth in total value. This was partially offset by 907 companies that have reduced their exports and 526 companies that ceased exporting. These companies declined by $318 million. Figure 3 illustrates that all exporter size segments contributed to the rise in export value, while the larger exporters contributed to the decline in volume.

Figure 3: Export growth rates by exporter size

Destinations

In the year ended September 2019, Australia exported wine to 123 markets. Nearly all the major global regions imported more Australian wine in the past year, with the exception being Europe, which declined by 3 per cent to $587 million FOB.

The regions in growth are:

• Northeast Asia, 17 per cent to $1.34 billion
• North America, 0.1 per cent to $625 million
• Southeast Asia, 5 per cent to $179 million
• Oceania, 1 per cent to $106 million, and
• Middle East, 16 per cent to $35 million.

Figure 4 illustrates the trend in exports by region since the global financial crisis. North America and Europe have largely followed a similar trend, but most recently they started diverging, with the USA fueling growth in North America and the United Kingdom (UK) contributing to the decline in Europe. Asian markets have experienced phenomenal growth, Northeast Asia being the stand-out performer thanks to Australian wine’s success in China. However, Southeast Asia has also shown steady growth since 2013; the destinations driving this growth in the past year are Indonesia, Philippines, Vietnam and Singapore.

Figure 4: Value of exports to regions over time (million AUD FOB)

Highlights from Australia’s top export markets

Exports to mainland China increased by 19 per cent in value to $1.13 billion, a record, while volume declined by 16 per cent to 140 million litres (15.5 million 9-litre case equivalents). Average value increased to a record level of $8.08 per litre FOB.  While glass bottle volume did decline slightly, by 1 per cent to 114 million litres (13 million 9-litre case equivalents), almost all the volume decline was in unpackaged wine, down by 51 per cent to 25 million litres (2.8 million 9-litre case equivalents).

Exports to the USA increased by 3 per cent to $436 million during the year ended September 2019. Volume declined by 9 per cent to 146 million litres (16 million 9-litre case equivalents), leading to an increase in average value by 13 per cent to $2.97 per litre FOB.

Like exports to China, most of the volume decline was in shipments of unpackaged wine, down by 18 per cent to 61 million litres (6.8 million 9-litre case equivalents). Glass bottle shipments also declined slightly by 2 per cent to 85 million litres (9.5 million 9-litre case equivalents). However, the value of bottled wine increased by 7 per cent to $362 million, due to an increased average value of bottled wine by 8 per cent to $4.24 per litre FOB.

This increase in average value of bottled wine is a result of the growth in exports of premium Australian wine to the USA. Exports with an average value of $10 and above increased by 20 per cent to $47 million, the highest value since late 2009.

Exports to the UK remain subdued due to uncertainty surrounding Brexit. Total value was down by 4 per cent to $365 million and volume down 2 per cent to 233 million litres (26 million 9-litre case equivalents).