Australian wine exports drop 30pc to just over $2bn last year, hit by China’s tariffs

China’s tariffs on Australian wines including Penfolds and Hardys has battered exports, with international sales plunging 30 per cent last year.

China’s tariffs on Australian wines including Penfolds and Hardys has battered exports, with total international sales plunging 30 per cent last year. Picture: Brannon Jackson

China’s tariffs on Australian wines including Hardys, Penfolds and Haselgrove delivered a significant blow to exports of local wine last year, with total overseas sales down by 30 per cent to a little more than $2bn.

Exports to mainland China, once the biggest single overseas destination for Australian wine sales, slumped by almost $1bn to only $29m for the 12 months to the end of December, according to Wine Australia’s latest Export Report released on Thursday.

Wine exports to China were hit by tariffs imposed in November 2020 in the wake of rising political tensions between the two countries.

“The 2021 calendar year represents the first full 12-month period since very high tariffs on Australian wine imported to China were imposed,” Wine Australia General Manager Corporate Affairs and Regulation, Rachel Triggs, said.

Ms Triggs said it would “take time to offset the loss in trade to mainland China.”

“This is not something that will happen overnight, nor within a year,” she said.

But 2021 did see an increase in exports to Hong Kong, which were up by 45 per cent to $192m, and Singapore which were up by 108 per cent to $166m.

Ms Triggs said the figures showed that the Australian wine export community was “managing its way through exceptionally challenging times.”

She said the industry was also being hit by other challenges including supply chain and global logistics issues as a result of Covid-19.

“The global impact on the industry of the challenging operating environment can now be observed in full,” she said.

“The export figures are reflective of the unprecedentedly tough market conditions over the past 12 months as a result of tariffs imposed 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.”

The figures show that exports of Australian wines excluding China were up by seven per cent in $2bn although they fell by 6 per cent in volume to 613 million litres.

“This is the first time that exports excluding mainland China have reached $2bn for a calendar year since 2009,” Ms Triggs said.

Sales to the UK were down by one per cent to $453m and sales to the US fell by seven per cent to $403m.

But this was offset by increases in sales to Singapore, Hong Kong, South Korea (up 74 per cent to $47m), Taiwan (up 65 per cent to $31m) and Thailand (up 31 per cent to $28m).

Exports of wine of more than $10 per litre FOB increased in value by 49 per cent when excluding mainland China.

Ms Triggs said this was a positive sign that there was demand emerging in other markets for products which would previously have been exported to China.

“It highlights the importance of the Australian grape and wine sector investing in market diversification,” she said.

“The pandemic is still disrupting the on-trade, the global freight crisis is continuing to cause shipping delays and increased freight costs, and while there was export growth to many destinations.

“But the Australian wine sector is resilient, and there are early signs that hard work in expanding and diversifying markets is paying off,” Ms Triggs said.

The decrease in volume, aside from mainland China, was mostly in shipments to the UK, the US and Canada, where export volumes had surged in 2020 due to COVID-19 induced stockpiling.

Sales to these countries were also hit by the global freight crisis later in 2021.

Apart from the impact of the China tariffs, Wine Australia says the fall in the volume of export sales last year was also due to the low level of wine inventory at the beginning of last year after three small vintages in previous years as well as delays in getting the large 2021 vintage onto ships because of the global freight crisis.

In the 2021 calendar year, 201 million litres of 2021 vintage wine was shipped, which is about 10 per cent less than the 2017, 2018, and 2020 vintages at the same time in their respective years, and 7 per cent ahead of where the 2019 vintage was at this stage.

“A relatively high share of the small 2020 vintage was brought forward to ship in 2020, leaving a smaller amount left to ship in 2021.

The 2020 vintage was the smallest vintage since 2007 and much of it was shipped in 2020 to the UK and the US in response to increased demand for Australian wine during Covid-19 and ahead of the Brexit transition conclusion,” Ms Triggs said.

The global freight crisis emerged in the second half of 2021, hampering exporters’ ability to get wine into markets, particularly in the US and Europe.

“Exporters experienced both increased delay times and increased costs of containers over the past year,” Ms Triggs said.

She said Australia was “at the mercy of bigger international players” when it came to the global demand for containers.

“The crisis is not expected to be resolved before the end of 2022.”