In the year ended March 2020, Australian wine exports increased by 3 per cent in value to $2.87 billion and declined by 11 per cent in volume to 728 million litres (81 million 9-litre case equivalents). The average value of exported wine increased by 16 per cent to $3.95 per litre free on board (FOB), the highest year ended March value since 2005.
Total export value for the quarter ended March 2020 declined by 7 per cent compared to the same quarter in the previous year. This was largely driven by a decline in exports to mainland China during the month of March, as a result of wide-scale lockdowns in response to the coronavirus pandemic. Coronavirus impacts on exports were only able to be observed in exports to China as this was the first epicentre of the virus. Based on exports to the end of March, it is too early to tell what the effect of the subsequent world-wide spread of the virus has had, and will have, on exports to other destinations.
Total export volume continued its decline, driven mainly by lower price segments. This comes after a record volume of exports in 2018, which followed a record Australian wine grape harvest in 2017. However, there is now less wine available for export as there were two consecutive lower vintages in 2018 and 2019 and inventory has already been drawn down.
Price segments
In the year ended March 2020, the largest decrease in value was seen at price segments below $5 per litre FOB (see Figure 1). On the other hand, exports above $10 per litre FOB increased by 22 per cent to $1.08 billion, with the $50–99.99 segment being the key driver of this value growth.
Figure 1: Total exports by price segment ($ million FOB)
Destinations
In the past 12 months, Australian exporters have shipped wine to 119 destinations. Northeast and southeast Asia continue to be the source of growth for Australian exports, increasing in value by 11 and 19 per cent respectively (see Figure 2). All other regions declined:
- North America, by 5 per cent to $596 million,
- Europe, by 6 per cent to $577 million,
- Oceania, by 3 per cent to $105 million, and
- Middle East, by 1 per cent to $32 million.
Figure 2: Change in value of exports by region
Mainland China
Exports to mainland China increased by 15 per cent in value to $1.15 billion and decreased by 11 per cent in volume to 130 million litres (14.4 million 9-litre case equivalents). Average value increased by 30 per cent to $8.86 per litre FOB.
In many ways 2020 started off much the same as the past few years for Australian exports to China. The first quarter of the calendar year is historically the quietest (see Figure 3) as most exporters want to get their wine into market ahead of Chinese New Year, and therefore ship in the December quarter. In fact, the value of exports in January and February 2020 combined ($106 million) was 13 per cent higher than the same months in 2019 ($94 million).
Figure 3: Quarterly export value to mainland China
The first reports of COVID-19 in China have been traced back to late December 2019, but areas of China were not locked down (i.e. restricting the movement of people and closing non-essential businesses) until 23 January 2020. It is therefore not surprising that no difference is seen in the export figures until March as most shipments for January and February would either have been on their way or already approved by then.
The latest wine import figures from Global Trade Atlas, for the year ended February 2020, show total imports decreased by 17 per cent in value (USD) and 14 per cent in volume. This decline was driven by French bottled imports, down by 39 per cent in value. Australia’s bottled imports increased by 11 per cent in value and was the only source country not to show a decline in bottled wine value during the time period.
March is where the effects of the lockdown start to become apparent in the export data. Australian export value in March 2020 was 43 per cent lower than in 2019. This led to the quarter ending March 2020 being 14 per cent lower than the same quarter in 2019.
United States of America
In the year ended March 2020, Australian exports to the United States of America (USA) decreased by 2 per cent in value to $416 million and by 11 per cent in volume to 136 million litres (15.1 million 9-litre case equivalents). Average value increased by 11 per cent to $3.06 per litre FOB, the highest average value since year ending August 2009. Quarterly performance was similar to the year ending 2019 results for total value, down by 2 per cent compared to the quarter ending March 2019.
United Kingdom
In the year ended March 2020, Australian wine exports to the United Kingdom (UK) decreased by 10 per cent in value to $347 million and 9 per cent in volume to 219 million litres (24.3 million 9-litre case equivalents). Average value declined slightly, by 1 per cent, to $1.59 per litre FOB. Quarterly performance was slightly better than the year ended figures, with value declining by 6 per cent for the quarter ending March 2020.
As discussed above, it is too early to tell what the effect of the subsequent world-wide spread of the virus has had, and will have, on exports to other destinations.
Sales data from the UK and USA suggests that while cafes and restaurants have closed and sales have been lost, it’s been offset by people buying more wine for at home consumption.
It remains to be seen if wine sales through off-licence and online balance out the decline in on-premise sales.
