Australian wine exports to its most valuable export market, China, are off to a bumpy start this year. Wine exports in the first four months of the year have been dented by the coronavirus pandemic, with China seeing the sharpest decline, and the future of wine trading between the two countries dogged by fears of escalating political tensions.
Wine exports to China in the past 12 months ended in April dropped to AU$1.136 billion, down from AU$1.148 billion for the 12 months ended in March, according to the latest figures released by Wine Australia.
This year, due to the virus outbreak, on-premise consumption and home consumption were nearly non-existent in China from late January to April.
But even with expected decline, Wine Australia, the wine trade association for Australia, admitted that consumption during the lockdown period was “lower than expected”.
This means wines that are meant to be depleted for Chinese New Year sale in January, the biggest wine consumption period in China, are now building up, adding pressure on inventory that are now translated into export dips.
As a result, the value of exports to mainland China has fallen by 14% during the first four months of the year, compared to 2019, according to the wine association. The decline was across all price points.
Additionally, the wine trade body says the average value of all global wine imports to China declined by 7%. “This is consistent with the anecdotal evidence that suggests Chinese imported wine consumption has started to shift toward commercial/value wines since the advent of the shutdown,” the trade org explains.
It’s not clear either if the downward trend will worsen as the political tensions between the two countries rise over the origin of coronavirus. China has already introduced a beef ban on four Australian companies and levied 80% tax on its barley exports in what analysts call “politically motivated retaliation”.
US and UK
Australian wine exports to the US also declined by 3% in the January to April period indicating that the shutdown in the US has not accelerated the decline to date. Different from China, wine sales during lockdown in the US surged off-trade, offsetting loss on premise.
The positive news for exports to the US during this four-month period is that the value of wine shipped at AU$10 or more per litre increased by 20%, the association added.
Meanwhile in the UK, the value of Australian wine exports declined by 7% in the 12 months ended April 2020 to AU$356 million. However, this is AU$8 million more than was reported for the 12 months ended March 2020, partially offsetting the decline to mainland China, says the wine trade org.
In the period January to April 2020, the value of exports grew by 3%, compared to the same period in 2019, encouragingly.