Australia’s finest wines achieve record value in 2016

Australian wine export value grew by 7 per cent to $2.22 billion in 2016 and average value grew by 6 per cent to $2.96 per litre free-on-board (FOB), the highest average value since 2009, according to the Wine Australia Export Report December 2016 released today.

This value growth was driven by bottled exports, particularly those at higher price points. Bottled exports grew by 10 per cent to $1.8 billion. The average value of bottled exports hit a calendar year record, up by 5 per cent to $5.48 per litre FOB.

Wine Australia CEO Andreas Clark said, ‘Last year, Australia’s most premium wines took centre stage. Our highest priced wines ($10 or more per litre FOB) achieved record value in 2016, up an impressive 19 per cent to $574 million. This increase was driven by demand across all of our major export markets but particularly in the Northeast Asia region.

‘In another promising sign that we’re starting to see commercial benefits from an improved perception and increasing demand for our finest wines, the majority of Australian wine exporters (70 per cent) saw value growth in 2016.

‘We are maintaining the momentum early in the year with some of our biggest annual events where we partner with many Australian wineries and exporters, including the Australia Day Tasting series in the United Kingdom (UK) and Ireland, trade tastings in the United States (US) and Canada, master classes across China, a significant Australian wine presence at ProWein in March and our major partnership with Tourism Australia for the World’s 50 Best Restaurants, taking place in Melbourne in April.’

In 2016, bulk wine exports declined by 2 per cent to $400 million, soft-pack exports fell by 5 per cent to $14 million and exports in alternative packaging such as PETs decreased by 11 per cent to $4 million.

Growth in the premium price segments (Table 1) added more than $93 million in value in 2016.

Exports priced $10 and more per litre FOB were up in all of Australia’s top five markets except Hong Kong ­– mainland China by 47 per cent, the US by 23 per cent, the UK by 25 per cent and Canada by 9 per cent. Hong Kong was down by 12 per cent.

Table 1: Value and growth rate of exports by price segment

Exports by region

Exports to all regions recorded growth in 2016, with the exception of Europe, which declined by 3 per cent to $569 million. Exports to Europe priced $10 or more per litre FOB did however record double digit growth in 2016, up 10 per cent to $48 million. Exports to Northeast Asia continued to drive growth, with value to this region increasing by $130 million (23 per cent) to a record $707 million. North America was the next fastest growing region; it grew by $15 million (2 per cent) to $652 million.

China

Exceptional growth to mainland China continued, with the value of exports up 40 per cent to a record $520 million.

A buoyant Chinese wine import market is fuelling growth in Australian exports. However, Australian wine exporters have also been gaining market share. According to the Global Trade Atlas, total bottled wine imports in mainland China increased by 21 per cent to US$2.2 billion[1], half the rate of Australia’s growth. As a result, Australia’s share of the market increased by 1 percentage point to 24 per cent compared to the previous year.

United States

Exports to the US were up by 3 per cent to $458 million, driven by a rise in the average value of bottled wine exports, up by 9 per cent to $3.95 per litre FOB.

The latest export figures support the perception that a shift to more premium Australian wine offerings is gaining momentum. The Greater New York area (including states New York, New Jersey and Delaware) is at the epicentre of the revolution of Australian wine over the past five years and this revolution is being driven by Australia’s premium wines.

The Greater New York area has recorded five years of growth with that rate of growth increasing in 2016. In the past year, exports valued at $10 or more per litre FOB to New York were up by 58 per cent to $9.5 million, while the rate of growth in this price segment was 23 per cent for all of the US to $41 million.

United Kingdom

The UK market continues to be our largest in volume terms but, because 80 per cent of wine is shipped in bulk, it ranks third in value and exports were down 5 per cent to $355 million. The market did see strong rates of growth in exports of our higher priced wines. Exports priced at $5 or more per litre grew by a healthy 23 per cent to $68 million. The growth was even stronger for exports at $10 or more per litre, which grew by 25 per cent to $28 million, double the 20-year low in 2013.

Managing Director of Negociants UK, Simon Thorpe MW commented on the positive trends at the high end.

‘We’ve seen fairly strong depletions for mainstream and premium wines across the Christmas period with some real highlights. The trend towards premiumisation continues as the more engaged consumer segments look to trade up into GI (Geographical Indications) specific wines at and more than the £10 price point. This trend has been particularly strong in independent retail and premium fine dining venues.

‘In addition, we’ve never witnessed such strong demand for super-premium/iconic wines across our Australian portfolio, this demand coming from fine wine exponents whose customers are obviously keen to explore the very top end of what Australia has to offer.’

Other key markets

Exports to Canada fell by 0.2 per cent to $193 million and to Hong Kong by 16 per cent to $110 million. The value decline in Canada was minimised despite volume decreasing by 4 per cent as a result of a 4 per cent increase in average value to $3.15 per litre FOB. Much of the decline in value of exports to Hong Kong can be attributed to some exporters now shipping direct to mainland China due to the reduced tariffs as a result of the China-Australia Free Trade Agreement. Despite the declines, Canada remains the fourth and Hong Kong the fifth most valuable Australian wine export markets.

Australia’s top five export markets by value

• Mainland China – $520 million ▲40%
• US – $458 million ▲3%
• UK – $355 million ▼5%
• Canada ­– $193 million ▼0.2%
• Hong Kong ­– $110 million ▼16%.

Table 2: The relationship between FOB and indicative retail price

*Free on board (FOB) - ‘Free on board' value of the wine, where the point of valuation is where goods are placed on board the international carrier, at the border of the exporting country. The FOB value includes production and other costs up until placement on the international carrier but excludes international insurance and transport costs.