Premium label sales cushion coronavirus wine export hit

The global hospitality shutdown has hit Australia’s wine exports, but a premium shift and ongoing popularity in China have softened the blow.

Australia remains the top source for China’s wine imports. Picture: NCA Newswire.

The global COVID-19 pandemic has shaved 1 per cent of the value of exports of Australian wine during 2019-20.

But while lockdowns have limited consumption to a degree, overseas buyers are seeking out higher-priced wines, industry group Wine Australia said.

The average value of Australian wine exports grew to $3.89 per litre during 2019-20, the highest level since 2004–05.

Australian wine is proving as popular as ever in China, despite the growing political and trade tensions, with French wine sales in the region collapsing, securing Australia’s place as the biggest source of wine imported into China.

Nevertheless, the total value of exports for Australian wine decreased by 1 per cent to $2.84bn for the 12 months to June 30, as a result of measures to contain COVID-19. Export volumes for fiscal 2020 fell 9 per cent to 730m litres.

Wine Australia chief executive Andreas Clark said during the first two quarters of the year exports were following the growth trajectory of previous years, but they fell in the latter two quarters as the restrictions hit economies worldwide.

“The advent of the COVID-19 pandemic has resulted in unprecedented disruption to wine markets around the world with the closure of restaurants, cafes and bars”, Mr Clark said.

“While the first two quarters of 2019–20 showed increases in exports, in the third quarter ending March 2020, exports declined 7 per cent in value on the comparable quarter in the previous year, while the fourth quarter was slightly stronger with a decline in exports of 4 per cent in value.”

Mr Clark said there remained considerable uncertainty surrounding the extent, duration and impact of the COVID-19 pandemic in health and economic terms. However, there were some clear trends emerging in key markets in relation to wine sales.

“Overall, demand for wine and wine consumption has held up in most markets around the world”, he said.

‘The biggest impact has been on how consumers have purchased wine, with the shutdown of the on-premise channel (cafes, restaurants and hotels) and a shift to purchasing more wine online. In the off-trade channel (retail liquor sales), there has been growth across all price points, with the trend to premium and fine wine continuing however, the trend for declining commercial/value sales has reversed, with people gravitating to known brands and everyday rather than occasion wines.”

Exports to China increased by 0.7 per cent in value to $1.1bn and decreased by 17 per cent in volume to 121m litres. Average value increased by 22 per cent to $9.07 per litre.

Wine Australia said the growth in the average value was due to ongoing growth in exports at higher price points as well as a decline at the low end. Exports at $10 or more per litre increased by 11 per cent to $670m, while those at less than $5 per litre declined by 18 per cent to $211m.

“Despite the recent decline in value, Australia remains the number one imported wine category in mainland China and has performed better than its key competitors in the last year,” Mr Clark said.

Australia also beat key competitors in the China market, holding its 37 per cent market share, well ahead of France on 27 per cent, Chile with 13 per cent and Italy with 6 per cent. While Australian exports increased, French imports fell by 36 per cent, Chilean imports dropped by 26 per cent and Italy fell by 12 per cent.

The of exports to the US declined by 0.4 per cent to $430m and volume declined by 10 per cent to 137m litres. COVID-19 and restrictions on hospitality venues and the growth in retail sales appear to have assisted Australian wine sales with the value of exports stabilising in the third quarter before increasing by 14 per cent in the fourth quarter.

The top five destinations by value in fiscal 2020 for Australian wine exports were:

• Mainland China: up 0.7 per cent to $1.1bn
• United States: down 0.4 per cent to $430m
• United Kingdom: up 3 per cent to $383m
• Canada: down 6 per cent to $186m
• Singapore: up 13 per cent to $98m