China has played the dominant role in the growth of Australian wine exports summarised in the preceding market bulletin 2018: An impressive year for Australian exports, but China’s thirst for imported wine has not been limited to Australia.
From a global perspective, China has cemented its position in the top five wine import markets over the past four years, currently sitting in fourth place behind Germany, the United Kingdom, then the United States. This is a major shift from its 15th place over 10 years ago.
With such significant growth over the years, it’s inevitable that the percentage growth rates would slow.
Between the year ending November 2017 and the year ending November 2018, the total volume of wine imported to China declined by 5.2 per cent although value increased by 8.2 per cent to A$3.9 billion.
According to the Global Trade Atlas, it appears that the decline in volume has come from fewer French and Spanish wine imports, both bottled and bulk. Imports from Australia and Chile on the other hand, experienced increases and both countries have been growing their market share for a number of years.
Figure 1: Wine imports to China and market share of top five markets
Source: China Import Statistics, Global Trade Atlas
Chile, like Australia, has a free trade agreement with China and had been experiencing growth until difficult seasons resulted in low harvests in 2016 and 2017. Now, with reportedly good harvests in 2018 and a favourable unit value per litre of A$3.01 (Table 1), Chilean imports are back on the rise – displacing other exporters like Spain, which had increased exports to China over that period resulting in its highest market share result of 18 per cent in year ending November 2017, only to then drop to 10 per cent over the next 12 months. Both Chile and Australia’s market share of imports to China increased to 24 per cent in the year ending November 2018.
Table 1: Unit value per litre (Australian dollars) of total wine imports to China
Source: China Import Statistics, Global Trade Atlas (YE – Year ending)
So, what is happening within the Chinese market?
As mentioned earlier, export volumes did not break any records by the end of 2018, as they had done earlier in the year. This came despite a positive year-on-year result.
Figure 2: Australian wine exports by value and volume to China
A marked slowdown was also observed in total imports of all goods into China, with Reuters noting that the 3 per cent import growth has been the slowest rate since October 2016. The driving factor is an easing in demand, due to a slowing economy and unstable trade conditions and some weakness in trade confidence.
But according to David Lucas, Wine Australia’s Regional General Manager North Asia, ‘the continuing growth and development of Australian wine is robust.
‘Ongoing adjustments to inventory management policies by some leading exporters, especially by more effective use of the China Duty Free Zones, will naturally distort the underlying trend of exports when reviewing on a quarter-by-quarter basis.
‘The timing of key Chinese festivals, especially the upcoming Chinese New Year in February 2019, and the removal of the final 2.8 per cent duty reduction element from 1 January 2019, also affected exporters’ timing decisions for their shipments.
‘There is continuing evidence of premium brands performing well with over half of the overall growth being achieved by wines above A$20 per litre FOB (and in particular the A$20–A$30 price range) is strong – encouraging signals from the continuing premiumisation efforts’, he said.
It is important to keep in mind that Australia is still outpacing all other imported countries of origin when it comes to the growth in volume of bottled and bulk wine imports (Global Trade Atlas).
The International Wine and Spirit Record is also forecasting an 8 per cent average growth rate between 2018 and 2022. It recently reported that imported wine is still one of the trendiest wine categories in China.
Australia’s brand health in China according to Wine Intelligence, reported in Market Bulletin issue 114, is strong and improving but continued brand building and revised routes-to-market strategies are crucial to securing long-term success in China.
More information on Australian wine exports to China in 2018 is available to Wine Australia levy payers in restricted section of the Wine Australia website. Levy payers requiring access should contact market.insights@wineaustralia.com.