Key insights into three of Australia’s export markets in Southeast Asia

In our previous issue we provided an overview of the size and growth of the Southeast Asian wine market ahead of Vinexpo Asia in May 2023. In today’s bulletin, we will focus on three of the key markets for Australian wine exports in the region, bringing you more detailed insights.

Perception of Australian wine on the rise in Singapore

The largest wine market by value (and second only to the Philippines by volume) in Southeast Asia is Singapore. While the wine market in Singapore is fairly well developed compared to other destinations in the region, Singaporeans only drink 2.6 litres of wine per adult per annum. IWSR has forecasted that Singapore will experience growth by both volume and value during 2021–26, growing by just over 200,000 cases worth US$80 million, or 3 per cent on average per annum.

Australia is well placed to take advantage of this growth – being ranked number one in volume and value of wine sales in 2021, with French, Chilean, and Italian wines trailing after. And perceptions of Australian wine are improving among wine consumers in Singapore (see Figure 1). The perceived quality of Australian wine has been on a steady increase from 2016 to 2022, now scored 7.85 out of 10. While being associated with a wide variety of wines, as well as being food friendly, have always ranked highly by Australian wine drinkers in Singapore – attributes like expensive/fine, sustainable, and innovative are slowly growing as well. While it has only been measured for two years, the authenticity of Australian wines is ranked highly at 89 per cent of consumers agreeing with the association. In fact, Australian wine's associations with authenticity and sustainability in Singapore is on the same level as Australian wine consumers back home in the domestic market.

Figure 1: Perception of Australian wine by consumers in Singapore

(Source: Wine Intelligence Brand Health Study, commissioned by Wine Australia)

More generally, the Singapore wine consumer prefers smooth, easy drinking wines in both red and white varieties – with Sauvignon Blanc, Chardonnay and Moscato ranked as the top three white varieties and Merlot, Cabernet Sauvignon, and Pinot Noir being the top three red. High involvement with the wine category has risen from 35 per cent of wine drinkers to 43 per cent since 2020, with the most common motivations for drinking wine being to celebrate a special occasion or to feel relaxed[1].

Singapore's wine sales in the on-trade are characterised not only by fine dining restaurants, but also through large catering businesses due to its status as a business hub in the region. According to Euromonitor International, in 2018, half the volume of wine sold in the market was through on-trade outlets – and half of that volume was through catering businesses. During COVID-19 purchasing habits shifted towards retail and it is expected that this will be a lasting adjustment. With an estimated 4,000–5,000 importers, there is a high level of fragmentation and competition, but transparent and standardised importing requirements assist exporters wanting to enter the market[2]. For more information on importing procedures, labelling requirements, and duties – please see the Singapore Export Market Guide.

Singapore is a major trading hub in Southeast Asia, and as such some of the wine it imports gets re-exported to other markets in the region. For instance, in 2021 it recorded wine imports of more than 32 million litres, while only 12.4 million litres were consumed in market. While Australian wine ranks first in consumption, French wine is the number one imported source. It appears that most of the French wine is re-exported – to markets including Japan, Hong Kong, and even Australia. A share of Australian wine is also re-exported, to destinations such as Malaysia, Indonesia, and Thailand[3].

Thailand leaps into Australia's top 10 export markets

Thailand is an emerging wine market, where consumption is driven by tourists. During the COVID-19 pandemic inbound tourism suffered and wine consumption along with it. The volume of wine sold in Thailand fell by 23 per cent in 2020 to 1 million cases, and recovered slightly to 1.2 million cases in 2021. IWSR forecasts a return to 2019 level of wine consumption by 2024. This is similar to OECD’s forecasts for the recovery of the tourism sector in Thailand (see Figure 2).

Figure 2: Tourism share of GDP in Thailand – 2013 to 2028

Australia is the number one country of origin by volume and value of wine sales in Thailand, ahead of Chile, Italy, and France. In 2022, Australian wine exports to Thailand increased by 118 per cent in value to $62 million and 129 per cent in volume to 7 million litres. This translated to a rise in the value ranking of Thailand as a destination market from number 15 in 2021 to number 7 in 2022 – its first appearance in the top ten.

According to Euromonitor International, still red wine is the most popular style among consumers in Thailand, especially wines that are easy-drinking suiting the Thai palate best. This aligns with Australian exports to the market – which are 78 per cent red, with Cabernet Sauvignon and Shiraz being the most popular varieties. In Thailand, middle class consumers and those aged between 30–44 years consume alcohol most frequently. These groups of consumers are often open to trying to new flavours and see wine as a status symbol when consuming outside of the home.

As of 2015, the tariff on Australian wine imports into Thailand fell to 0 per cent, thanks to the Thailand–Australia Free Trade Agreement. For more information on importing procedures, labelling requirements, and duties – please see the Thailand Export Market Guide.

Australia growing in Vietnam despite strong competition

Unlike Singapore and Thailand, the Vietnamese wine market has a significant domestic category which, in 2021, had a 26 per cent volume share of wine sales. Australia ranks fifth in volume after domestic, Chilean, French and Italian wines. Australian wine is forecasted to grow by 9 per cent per annum out to 2026, slightly faster than the total market (8 per cent growth) and overtaking Italy in volume by 2023 (see Figure 3). In 2022, Australian wine exports to Vietnam grew by 103 per cent in value to $11 million and 222 per cent in volume to 2.1 million litres. The number of exporters shipping to Vietnam also grew – up 60 per cent to 101 companies.

Figure 3: Volume of wine sales in Vietnam by top countries of origin

(source: IWSR)

Estimates from Euromonitor International suggest that wine sales in Vietnam are approximately 65 per cent still red, 25 per cent still white, and 10 per cent sparkling. Australian wine exports to Vietnam are 87 per cent still red, 8 per cent white, and 5 per cent other – with Shiraz and Cabernet Sauvignon being the varieties driving growth.

As with other markets in the region, wine consumption is heavily reliant on tourism and faced setbacks during the COVID-19 pandemic. Beer is also a major competitor – controlling 99 per cent of the alcohol market in Vietnam. Wine (especially imported) is seen as a luxury product typically reserved for special occasions or corporate gifts. Because wine is an emerging category in Vietnam, consumers often use attributes such as price for an indication of product quality, especially for those on lower incomes. While per capita consumption is less than a litre per year, population and economic growth make Vietnam an attractive emerging market in the years to come.

In 2022, under the ASEAN–Australia–New Zealand Free Trade Agreement (AANZFTA), tariffs on Australian wine imported into Vietnam dropped from 80 to 20 per cent. AANZFTA has a faster tariff reduction schedule than the Comprehensive and Progressive Agreement for Trans-Pacific-Partnership (CPTPP). Australian exporters will see further tariff reductions under CPTPP from 2026 (year 9 of the CPTPP). Tariffs on wine will be eliminated in 2028. For more information on importing procedures, labelling requirements, and duties – please see the Vietnam Export Market Guide.