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Wine Australia: market diversification did not offset China loss

Australian wine exports saw moderate growth from market diversification outside of mainland China, but the progress was no match to offset the loss from its former largest export destination.

Australian wine exports saw moderate growth from market diversification outside of mainland China, but the progress was no match to offset the loss from its former largest export destination, according to the latest export data released by the country’s wine authority.

In the year ended March 2022, Australian total wine exports further dropped by 26% in value to AU$2.05 billion and 13% in volume to 628 million litres, Wine Australia’s latest report shows. 

The figures reflect the far reaching impacts  of China’s anti-dumping tariffs on Australian bottled wines since November 2020 amid global freight crisis and cool-down in some markets after COVID-19 induced stockpiling.

Exports excluding mainland China also shrunk by 3% in volume, but increased by 7% in value to AU$2.03 billion, the highest value since 2010. The trade body says 71 out of 112 export destinations of Australian wines saw value growth.

Australia's wine exports contracted 26% in the last 12 months. (pic: Wine Australia)
Australia’s wine exports contracted 26% in the last 12 months. (pic: Wine Australia)

However, the moderate growth “did not come close to offsetting the decline in value to mainland China”, which equals AU$844 million, according to Rachel Triggs, Wine Australia’s General Manager of Corporate Affairs and Regulation.

Compared to the same period last year, Australian wine exports to China were down by 84% in volume to 1.5 million litres, dragging China from top position to being only 7th biggest exporting country for Australian wines. 

In value terms, Australian wine exports to China decreased by a whopping 79% to AU$214 million. Before the tariffs, its export value to China was AU$1.3 billion. China officially imposed up to 218.4% anti-dumping tariffs on bottled Australian wines in March 2021, which is expected to last until 2026.

“Over the past 15 months, Australian wine exporters have had to navigate through an exceptionally challenging operating environment, largely led by the imposition of high deposit tariffs on bottled Australian wine imported to mainland China, the continuing impact of the global freight crisis, and a counter-swing in some markets after COVID-19 related stockpiling in 2020,” Triggs said.

In the 12 months to the end of March 2022, the top five exporting markets for Australian wines by value were the UK (-2%), the US (-4%), Hong Kong (+24%), Canada (-13%) and Singapore (+96%).

By volume, the top five markets were the UK (-6%), the US (-5%), Canada (-7%), Germany (-8%) and New Zealand (+6%). 

Outside of mainland China

China and Australia's worsening relations would cost Australia its AU$1.3 billion wine exports. (pic: file image)
Australia’s wine exports to China dropped from AU$1.3 billion to AU$214 million (pic: file image)

Excluding mainland China, the 13% decline in total wine export volume was driven by the normalised UK and the US market. Exports to these markets surged in 2020 due to COVID-19 induced stockpiling for the off-premise trade, but demand has eased when the pandemic restrictions relaxed.

“Low inventory after three small consecutive vintages and delays in getting the record 2021 vintage onto ships from the ongoing global freight crisis also contributed to the decline in volume of wine exports. Shipping industry experts do not expect these issues to resolve until the second half of 2022 at the earliest,” Triggs added.

In value terms, Australian wine exports also declined in all price segments driven largely by the mainland China market and exports valued under $10 FOB per litre to the US and UK. 

However, Australia has paid efforts to diversify its markets for wine exporters. Excluding mainland China, exports within the premium segment above $10 FOB per litre were up by 47%, with 58 out of 89 export destinations recording growth in this price segment.

These destinations included Singapore, Hong Kong, Thailand, the US, the UK, South Korea and Taiwan, according to the report. 

Asia market

Hong Kong, City, Victoria Harbour - Hong Kong, Cityscape, Victoria Peak (pic: istock)
Hong Kong is now Australia’s third largest export market by value (pic: istock)

The most significant growth was recorded in Southeast Asia, with export value growing 63% to AU$281 million in the 12 months ended March 2022.

In contrast, exports to Northeast Asia were down by 70% to AU$337 million, driven largely by decline in mainland China.

Key drivers of the value growth were in markets including Singapore, Hong Kong, Thailand, South Korea, Taiwan and Japan, which shows “market intensification and diversification is having an impact”, according to the report.

Hong Kong became the third largest destination for Australian wines with export value up by 24% to AU$184 million, making it the top exporting region among the key Asian markets. 

As we have reported, Australia was Hong Kong’s second largest wine supplier in 2021 with an astonishing surge of 131% in export value. Many suspected the Australian wines are funnelled into the mainland market through illegal channels to bypass the harsh tariffs.

Singapore also recorded an export value growing 96% to AU$168 million, turning it the 5th largest export destination of Australian wine by value globally and the first runner-up in Asia.

India recorded the strongest growth of 134% in export value to AU$15 million in a year.

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