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Australian wine exports surge despite Covid and China’s tariff threat

Australian wine exports surged 4% on steady global demand in the 12 months ended in September amid a pandemic and tariff threats from its most profitable market - China.

Australian wine exports surged 4% on steady global demand in the 12 months ended in September, according to the latest data released by Wine Australia, despite what its CEO calls “unprecedented disruption” amid a pandemic and tariff threats from its most profitable market – China.

During the period, Australia’s wine exports to all top-five export markets recorded a 4% increase in overall value to AU$2.998 billion, the highest level since exports reached AU$3 billion in the second half of calendar year 2007, according to Andreas Clark, CEO of Wine Australia.

Andreas Clark, CEO of Wine Australia

“Despite the unprecedented disruption that we’ve seen in markets around the world, Australian wine export volume has held reasonably steady and it is particularly pleasing to see both the overall value and the average value of exports growing during these challenging times”, says Clark.

For the 12 months to the end of September 2020, the growth in value was predominantly driven by exports to the UK and mainland China. And that growth has been particularly strong from July to September this year, says the wine association.

One explanation for the surge in the last quarter, as industry insiders speculated is Chinese importers’ rush to stockpile Australian wines before imminent tariff hike which was rumoured to be announced as early as October. In September, Australia’s red wine sales to China jumped 150%, as we have reported citing data by Australian Bureau of Statistics.  

Exports to mainland China increased by 4% in value to AU$1.17 billion and decreased by 12% in volume to 123 million litres (13.7 million 9-litre case equivalents). Average value increased by 18% to AU$9.54 per litre FOB. Higher-priced exports recorded exceptional growth, especially at $30 or more per litre, according to Wine Australia. Almost two-thirds of Australia’s exports to mainland China are priced at AU$10 or more per litre.

Overall exports to China including Hong Kong and Macau however slowed and stood at AU$1.26 billion, up 1% year-on-year.

It’s too early to judge how Australian wines will fare in the Chinese wine market in the coming months, as China has launched twin investigations on Australia’s alleged dumping and subsidy. If the claims are validated, China could slap as much as 200% punitive tariffs on Australian wines, which at the moment enjoy zero import tariff and take up close to 40% of market share in China.

For the UK market, exports increased 18% to AU$430 million and 10% in volume to 256 million litres (28.4 million 9-litre case equivalents), the highest in value since 2011. The increase as the association explains is partly because some companies are shipping products to the market ahead of the impending Brexit deadline of 1 January 2021 to minimise any potential disruption.

Australian exports to the US during the 12 months increased by 1% to AU$439 million, mainly driven by lower end wines in the AU$2.50–4.99 per litre segment (up 9 per cent to $291 million) and, to a lesser extent, $5.00–7.49 per litre segment (up 5 per cent to $24 million).

“Different markets have had different trends. In markets such as the UK and United States of America (USA), growth was primarily at the commercial/value end, while in China growth for premium wines has remained strong this year,” adds Clark.

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