Our latest figures on Australian wine exports to the UK and Europe – the first of 2017 – have now been released. To gain some insight into what this fresh data reveals, Laura Jewell MW, Wine Australia’s Head of Market EMEA gave us her assessment of the figures.
Australian Wine in the UK and Europe
Here we are at the beginning of February, having just completed our series of Australia Day Tastings in London, Edinburgh and Dublin, taking some time out to review what is happening in the markets and reflect on the latest export figures.
While the UK remains the largest export market by volume, it is in decline and that slowdown has been more evident in the second half of the year post the Brexit vote. Politically we are watching as parliament supports the government in its plans to trigger Article 50, and negotiations can begin. The Christmas trading period seems to have been upbeat for many, with a number of importers claiming their best sales for several years and there is optimism about the year to come despite exchange rate challenges. Simon Thorpe, MD of Negociants UK, said:
‘We have seen fairly strong sales for mainstream and premium wines over the Christmas period with some real highlights. The trend towards premiumisation continues as the more engaged consumer segments look to trade up into G.I.-specific wines at and above the £10 price point. This trend has been particularly strong in independent retail and premium fine dining outlets. In addition, we have 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. Long may it continue!’
Premiumisation of Australian wine
This move towards more premium Australian wines is reflected in the increase in bottled exports (see figure 1), growing by 6%, while bulk imports fell by 14%. There is always a caveat with the export figures in that there is a lot of bulk wine that is bottled and then re-exported to other countries, which we cannot capture. Nowhere is this more obvious than the UK, where most of the major Australian brands are bottled and then distributed to other European markets.
Figure 1: Australian bottled exports to the UK
Germany is a similarly bulk-dominant market, although here we have seen the value of exports decline by 10%, and volume by 7% over the last 12 months. With its federal structure, the German market is complex and time-consuming to deal with. It is known for its price sensitivity and the strength of the discounters. However, it still offers space for new products particularly at the premium end, both in the on-trade and the specialist off-trade. Exports of Australian wine over $10 per litre are up 15%, with Shiraz the leading variety in this price segment growing by 29%.
The Irish market is buoyant, particularly in Dublin where a vibrant food scene is translating into positive sales. Exports grew by 24% to $16M, and those between $5 and $7.49 grew by 97% to $2M. This mood was reflected at our annual tasting in Dublin last week, with strong interest from the independents and on-trade sommeliers who attended. Ireland has a very strong and well-developed tourism industry and visitor numbers have been steadily increasing. The importance of the tourism industry cannot be underestimated. Eating and drinking in pubs and restaurants is now a vital part of Ireland’s tourism offering which continues to contribute significantly to wine sales in Ireland. Australia remains in second place in terms of market share in the off-trade, behind Chile.
The Swedish economy hit a bump in late 2016 as flat growth in fixed investment and government consumption caused the economy to drop on a quarterly basis, although the slowdown was short-lived. In November, unemployment dropped, industrial production rebounded and exports expanded at a double-digit rate. Increased optimism in the manufacturing and services sectors bolstered trade and this is reflected in the Australian wine export figures. Value grew by 13% to $22M and volume grew by 12% to 6M litres. The growth came at both the low end and the high end and in both bottled and bulk figures. Exports at $5 per litre and above increased by 7% to $8M (see figure 2)
Figure 2: Australian exports to Sweden by price segment
With a wine consumption of around 217m L, or approximately 22 L per capita, Sweden is the biggest wine market in Scandinavia. Of these wines, 92% are bought in the stores of Systembolaget, the state-owned monopoly. According to Systembolaget, wine accounts for 42% of their sales, and the wine market has experienced a premiumisation trend in recent years. This is mainly due to rising excise duties and an increased demand for quality from consumers.
There is a profound interest in sustainable practices which shows up in the private lives of Swedes. As in many other Northern European countries, the Swedish market for organic food has grown steadily since the early 2000s. In the last 3 years’ though, it joined another trend – the health trend. Already environmentally conscious consumers were joined by a larger group of young, highly-educated people with a rising income. Health gadgets, such as fitness bracelets and super-foods became popular and buying organic food became part of the Swedish lifestyle. Wine is the product category with the highest number of new launches and it is not surprising that the organic trend has also manifested in wine: currently, 6.6% of the wine sold by Systembolaget is certified as organic. Sales of organic wines increased by 62% from 2014 to 2015 alone, following the organic food trend, and Systembolaget has set a goal to have 10% of its range certified organic by 2020.
Other European markets in growth include the Netherlands, Finland and Norway and we will be announcing our activities in all of these markets in the Wine Australia market programme shortly.
The future for Australian wine in the UK and Europe
What the latest set of export figures reveal is the complex picture that is the Australian wine market in the UK and Europe. There are plenty of areas of growth and the trend towards premiumisation is one that can only be welcomed. Strategically-speaking, Australian wine needs and deserves, premium billing; and the continued signs of this in important markets such as the U.K. is to be welcomed.
Brexit has obviously created uncertainty and will, alas, continue to do so for some time to come. But the fundamentals of the UK economy do seem strong, as underlined by the Bank of England’s dramatic increase in its growth forecast from 1.4% to 2% for 2017. And while consumer demand is slightly weaker than it was ahead of the vote, it has yet to show signs of significant decline.
2017 will be another interesting year; but an air of opportunity does seem to be abroad at the moment and it will be down to us - both as an industry and a trade - to capitalise on the opportunity this brings.
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