Where are the opportunities for Chardonnay?

After a decade in decline, Australian Chardonnay sales and exports are on the rise.  

A new generation of winemakers is bringing experience, expertise, experimentation and bold ideas that are shaking up the Australian Chardonnay landscape and making it fashionable to drink again. Australian Chardonnay today is a wine that takes advantage of its climatic origins and highlights the effects of winemaking influence. With a more elegant, refined style, Australian Chardonnay creates a perfectly food-friendly wine without overpowering or dominating.

Australian exports of Chardonnay increased by 4 per cent to $172 million in 2016, after 11 consecutive years in decline. The first quarter of 2017 has seen even stronger growth, with Chardonnay exports up 23 per cent compared to the first quarter of 2016. The strongest growth came at above A$10 per litre, up 30 per cent.

So, where are the opportunities for Chardonnay?

Australian exports of Chardonnay by value ($ million FOB)

Domestic market

The domestic market provides an attractive short- to medium-term opportunity for success. IRI MarketEdge Liquor data shows in the 12 months ended 30 April 2017, the value of bottled Chardonnay sales in the domestic off-trade market increased by 2.4 per cent. Growth in the premium segments was particularly strong. Sales at above $15 per bottle grew 6 per cent compared to 0.7 per cent growth for bottles below $15.

There is also growth in the on-trade. Matt Dunne, group sommelier for Solotel was quoted in March 2017 in Luxury magazine saying, ‘In Aria Restaurant in Sydney, it’s (Chardonnay) overtaken Sauvignon Blanc as the top selling varietal in the last 12 months’.

United States

Chardonnay is the number one variety in the United States (US) off-trade market. According to IRI, sales of Chardonnay grew by 1 per cent in the last 12 months to $US2.3 billion. While the big volumes are sold at below US$15 per bottle, the strongest growth is coming at premium price points. Sales at US$20–24.99 grew by 15 per cent and at US$25 and above by 11 per cent.

While exports of Australian Chardonnay to the US grew 10 per cent in the last 12 months to $69 million, the market remains a challenge.

Aaron Ridgeway, Wine Australia’s Head of Market, Americas, notes that ‘most city restaurants still prioritise France and California (mostly in that order), and despite a few bright spots, depth from Australia on lists is tricky to find.’

‘The dilemma is that there appears to be a “built-in argument” that Australian Chardonnay is somehow not as good as the competition. This is despite the fact that at entry point level, many Australian Chardonnays and their California competitors are very similar in style and may be characterised (fairly or unfairly) as too oaky or gooey. Meanwhile, if the critics are shown a more restrained premium offering, the buyer will likely revert to Chablis rather than considering the Australian offering.’

‘We have a perception problem and this will only change with persistent tastings, education, engagement and media investment.’

 United Kingdom

Chardonnay is the third most popular white variety in the United Kingdom (UK), behind Sauvignon Blanc and Pinot Grigio – and slightly in decline in the off-trade. Australia leads in Chardonnay sales in the UK off-trade market.

Wine Australia’s Head of Market, Europe, Middle East and Africa Laura Jewell MW notes that ‘there is still a lot of potential at the value end, with Chardonnay or Chardonnay blends. At the fine wine end, Burgundy still dominates, but high pricing and limited availability will push people to look elsewhere. Chablis, despite the price increases, is still very popular.’

‘Wine Australia sees opportunities in education and master classes to encourage consumers to consider Australian – or more likely regionally (or brand) specific Chardonnay.’

Exports are turning around in the UK. Exports of Australian Chardonnay to the UK grew by 8 per cent to the to $30 million in the last 12 months. There was growth in commercial and premium Chardonnays. Exports below $5 per litre increased by 12 per cent to $23 million while above $10 per litre increased by 16 per cent to $3 million.

Mainland China

China is a red wine dominant market, both for fine wine and entry level offerings. However, Chardonnay is on the rise. In the last 12 months, Australian Chardonnay exports to mainland China grew by 49 per cent to $10 million. Growth was particularly strong at the high-end with exports above $10 per litre up 53 per cent to $3 million.

Wine Australia’s Head of Market, China Willa Yang suggests that ‘Burgundy is our major competitor and customers seem happy to pay the price premium for that reputation, while noting that Australian Chardonnays are price competitive in the RMB 200 to 500 per bottle segment (roughly A$40–100).’

Willa sees ‘longer-term opportunities as whites become more popular with the younger generation and female consumers, as well as in the coastal cities where seafood is more common and popular.’

Asia Pacific

Wine Australia’s Head of Market, Asia Pacific, Hiro Tejima notes ‘at the recent New Australia master class in Japan, many guests gave praises to the modern style of Australian Chardonnay despite the relative affordability compared to Burgundy. We have received similar reactions from other mature Asian markets such as Hong Kong, Singapore and South Korea but are yet to hit a tipping point. Continuous education and communication are essential to capture the Chardonnay opportunity we clearly have worldwide.’

Australian Chardonnay exports have grown to key markets in Asia such as Japan (up 3 per cent to $7 million), Hong Kong (up 6 per cent to $4 million), Singapore (up 4 per cent to $3 million) and South Korea (up 51 per cent to $1.6 million).  Off smaller bases, Chardonnay exports also grew to the Philippines, Indonesia, Taiwan and Vietnam

Niche and emerging markets

While the size of the pie may be smaller, it may be significant for smaller producers to gain a profitable foothold and early-to-market advantage. Key regions to see growth in exports of Australian Chardonnay include:

• Europe (excluding the UK) up 21 per cent to $23 million
• Northeast Asia (excluding mainland China) up 9 per cent to $13 million, and
• Southeast Asia, up 7 per cent to $8.5 million.