China Export Report

For the first time in history, mainland China is now the number one destination by value for Australian wine according to our 2016 China Export Report.

For the first time in history, mainland China is now the number one destination by value for Australian wine according to our 2016 China Export Report. While the impressive growth of Australian wine in China is not necessarily new news to anyone anymore, this is still a key milestone in the shifting export paradigm. Aided by the introduction of the China–Australia Free Trade Agreement (ChAFTA) in December 2015 and the growing interest of the Chinese middle class in wine, exports to mainland China grew by 51% to $474 million. To put this in context, a decade ago Australian exports to the country were valued at $27 million. Let’s take a look at the story behind the figures to see what the future might hold in this vitally important market.

Figure 1: Top markets for Australian wine exports by value

China Export Report - fine Australian wine leads the way in China

When it comes to wine exports to China there are really only two major players, Australia and France. The French have 45% of the imported wine market, Australia have 23% and Chile takes the bronze wines with 11%.  But among the top eight importing countries Australia has the highest average value per litre.  Key messages on the quality and diversity of fine Australian wine are clearly resonating in the Chinese market. Walter Clappis, Winemaker, Walter Clappis Wine Co, is seeing good results for the wine he is exporting to China.

‘Education and the introduction of more sophisticated wines has played a major role for my company being able to achieve a higher litre price equivalent. ‘Australian wine is the best value for money wine in the world ‘is the message I endeavour to communicate at any given opportunity… a statement in which I believe absolutely!'

Historically the French have enjoyed worldwide recognition for their red and white table wines which they have attributed to their terroir.  For precisely the same reason Australian wines are now growing in universal popularity because of our unique terroir,’ he says.

Key Australian wines Chinese growth

So what are some of the key factors behind this exceptional value growth? Well there are several factors including the increasing appetite for premium Australian wine at high prices and the growing average consumption frequency of imported wine amongst the Chinese upper-middle class. Research from Wine Intelligence suggests there are now 48 million upper-middle class imported-wine drinkers in mainland China, up from 19 million in 2010.  Wine Intelligence predicts that this figure will grow to 160 million people by 2025. This is a figure equivalent to about half the total population of Australia’s second biggest market for wine, the United States.

China Export Report - wine moves from ultra-luxury to everyday premium

Wine in China is becoming more of an everyday premium drink for imported wine consumers rather than an ultra-luxury product. The China Wine Barometer report prepared by the University of South Australia and funded by Wine Australia, supports this trend.  Furthermore, it suggests that consumption occasions are moving more into the informal and ‘at home’ locations, which means that sales are growing faster in the off-trade and online than on-trade channels.  This coincides with the recent launch of a flagship Australian wine online store on Alibaba Group’s business to consumer platform, Tmall.com, providing a further avenue for Chinese consumers to purchase Australian wines.

‘The food and wine culture in China continues to evolve, and there is increased demand from Chinese consumers for premium quality products online. Our support of Tmall’s flagship Australian wine store helps us capitalise on this growing interest in Australian wine and gives us the opportunity to further reinforce the message with consumers that wines of Australian provenance are of the highest quality.’ Andreas Clark, CEO Wine Australia

Red wine dominates. White wine growing strongly

China’s thirst for Australian red wines is showing no signs of abating. 93% of Australian exports to mainland China are red wines. The value of our red wine exports grew by 53% to $441 million. Furthermore, 28% of all Australian red wine exports are destined for mainland China, well ahead of the United States with 17% of red wine exports.

Figure 2: Top five red wine varieties exported to China While the domination of Australian reds over whites in China is expected to continue for some time, there have been some exciting signs of growth for Australian white wines.  Chinese fine wine consumers are beginning to broaden their palates beyond red wines. Despite coming off a low base, exports of Australian white wines to the Chinese markets grew in the twelve months to September 2016 increased by 33% to $23 million.  And this growth in the value of Australian white wine exports to China is taking place at the higher price points. This indicates that changes in the Chinese market are expected as consumers’ tastes diversify, showing potential for future growth in this area.

‘White wine in China is such a small volume at the moment but purely based on their cuisine and the heat in the summer in many cities… it’s well suited to the Chinese market. Our biggest challenge is getting them to understand white wine…’ Paul Byron, Periscope Management

Figure 3: Growth in white varieties in China

A bright future for Australian wine in China

It’s now clear that what was once just potential has now become reality. The Chinese market is the biggest market by value for Australian wine. Exports to mainland China contributed 60% of the growth in the value of all Australian exports at $10 and above per litre FOB.  One-third of Australian wine exported in this price segment is now exported to mainland China. While it might be a little pointless to keep a lid on expectations it is fair to say that the hard work has really only just begun. To use a sporting analogy, the Australian wine community has run a measured first lap in a long distance race. The time for patience, commitment and consistency in China is now.

Disclaimer

This information is presented in good faith and on the basis that Wine Australia, nor their agents or employees, are liable (whether by reason of error, omission, negligence, lack of care or otherwise) to any person for any damage or loss whatsoever which has occurred or may occur in relation to that person taking or not taking (as the case may be) action in respect of any statement, information or advice given via this channel.