With a complex wine market and lingering perceptions amongst some consumers that Australian wine is a one-dimensional category, the United States remains a challenging market for many Australian wineries. While key trade and opinion leaders have been praising Australia’s dynamic and diverse wine scene for several years there is still a long way to go in terms of representation in the premium market.
The tide may be turning though with our latest Export Report showing some optimistic signs. In the 12 months ended September 2017 Australian exports to the United States increased by 3 per cent to $461 million with positive trends in key premium wine segments. In this story, our Market Insights team take a quick look at how Australian wine is performing around the world before looking at promising research that hints at a bright future for Australian wine in the US.
‘With exports above A$10 FOB per litre seeing double-digit growth for the period, momentum is building behind wines that underpin the category’s premiumization trend. Australia is building strength and sustainable positioning at premium price points through an increasingly diverse offering of regions and varieties. It all bodes well for the next 12 months and beyond.”
Aaron Ridgeway, Head of Market, Wine Australia
Australian wine on the global stage – the latest facts and figures
The latest export figures released in October highlight the growing positivity around the Australian wine category across the globe. In the 12 months ended September 2017, the value of Australian wine exports grew by 13 per cent to $2.44 billion. The average value of exports grew by 4 per cent to $3.06 per litre FOB, the highest since the equivalent period in 2009.
Overall, an additional $276 million in revenue was generated by Australian wine exporters compared to the year prior. The average value of botted exports increased by 1 per cent to $5.53 per litre and for bulk exports increased by 3 per cent to $1.00 per litre.
Significantly there was growth across most price points. The growth was particularly strong for Australia’s premium wines, with exports at $10 or more per litre up 23 per cent to a record $672 million. This reflects the increasing demand for premium Australian wines in most regions around the world. Generally, most markets worldwide have experienced consumers trading up to higher value products, across a wide range of categories.
Red wine was the standout growth category for Australian table wine, up 16 per cent to $1.8 billion. Exports of white wine also grew but at a much lower rate, up 2 per cent to $546 million. Australian wine was destined for 124 countries and in further good news value increased to 82 of these.
The top five markets by value were:
- mainland China (30 per cent share of export value)
- the United States (19 per cent)
- the United Kingdom (14 per cent)
- Canada (8 per cent) and
- Hong Kong (5 per cent)
Together, these markets accounted for 76 per cent of the value of Australian exports.
How does this Australian wine positivity translate in the US market?
Currently, Australian wine exports to the United States are heavily weighted to the commercial end with 95 per cent of the volume priced at below $5 per litre. This is reflected in the retail figures. Australia holds a 13 per cent share of the off-trade market at US$4-7.99 per bottle according to IRI figures for 2016-17. This price point is the biggest segment of the United States off-trade market with just over a third share but is in decline.
In sharp contrast, the positive trend towards Australian premium wines in the United States continued. Exports at $10 per litre or more increased by 11 per cent to $43 million. The growth in premium wine exports to the United States is also evident in retail figures. Off-trade sales figures from IRI show at US$11 or more per bottle, Australian sales grew by 20 per cent while the total sales in this segment increased by 8 per cent.
Market penetration – an immovable obstacle in the United States?
The critical issue for the Australian wine category is that it lacks penetration in the premium market - Australia holds only a 1 per cent of the market at US$11 or more per bottle. However, this suggests there is significant upside for premium Australian wines in the United States. Recent research conducted by Wine Intelligence on behalf of Wine Australia suggests that the perceptions of Australian wine are gradually improving.
The quality rating of Australian wine among regular wine consumers in the United States has increased from 7.82/10 to 8.13/10 in 2017. Furthermore, the percentage of regular wine consumers in the United States that recognised Australia for its expensive/fine wines increased from 37 per cent in 2010 to 46 per cent in 2017. In contrast, reflecting Australia’s strong position at the commercial end of the market, 91 per cent of regular wine consumers viewed Australian wines as good value for money.
‘People should drink Australian wine because it's probably not what they think it is. There's this whole new wave of producers and a whole new wave of wine styles.’
Joe Czerwinski, Managing Editor of Robert Parker Wine Advocate
This is backed up by the ‘real world’ experiences from those working on the frontline in the US. Matt Lane, Torbreck Vintners USA, Vice President, Americas said, ‘Year-to-date depletions for Torbreck Vintners USA is seeing double digit growth, fuelled by the central and west zones. This sales growth is coming from focusing on our long-term channel strategy in the on-premise trade with Cuvee Juveniles and The Steading making solid headway. We have taken decisive steps forward in the luxury Barossa and Australian wine export market and we are engaged and enthusiastic to watch this growth continue into 2018.’
Are brighter days ahead for Australian wine in the US?
There’s no question that there is still much work to be done in the US market to ensure this short-term trend towards premium Australian wine becomes a significant and sustainable phenomenon. Hard work and challenges are much easier when there are prospects for success in the end.
Which sums up the story for Australian wine in the US right now. There are no rivers of gold, fewer quick bucks to be made. But there is palpable excitement around the category - moving from the trade and opinion leaders to consumers, slowly but surely. Key activities are being planned and the Australian wine community’s confidence in the market is better than it’s been in many a year. Lessons have been learned and Australia’s wines are tasting better than ever. Weighing up all these factors you’d be a brave person to bet against future success for Australian wine in the US.
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