Wine Australia’s Export Report for the year ended June 2020 shows that despite short supply and COVID-19 restrictions, Australian wine exports experienced only a small decrease in value of 1 per cent to $2.84 billion in 2019–20.
The average value of exports increased by 9 per cent to $3.89 per litre free on board (FOB), the highest level since 2004–05.
However, total export volume continued its decline, driven mainly by lower price segments. The volume of exports decreased by 9 per cent in volume to 730 million litres (81 million 9-litre case equivalents).
Figure 1 shows there is a strong relationship between export volumes and the size of the crush. In 2017–18, Australia exported a record volume of wine following a record Australian winegrape crush in 2017. Currently, there is less Australian wine available for export as there have been 3 consecutive lower crush vintages in 2018, 2019 and 2020, and this is reflected in the declining volume of exports.
Figure 1: Australian winegrape crush v export volume over time
The advent of the COVID-19 pandemic has resulted in unprecedented disruption to wine markets around the world with the value of Australian wine exports declining since the pandemic was declared in March. Figure 2 shows that in the fourth quarter of 2019–20 (April to June), exports decreased by 4 per cent to $716 million compared to the same quarter in 2018–19. This comes after a 7 per cent decrease in the third quarter and increases in quarters one and two.
Figure 2: Value of exports by quarter (million AUD) – FY2019 v FY2020
In the past year, Australian exporters shipped wine to 116 destinations. Exports increased in value to Europe (by 3 per cent to $615 million) and South East Asia (by 0.3 per cent to $181 million), which partially offset declines to other regions:
- North East Asia, by 1 per cent to $1.3 billion
- North America, by 2 per cent to $617 million
- Oceania, by 5 per cent to $103 million, and
- Middle East, by 33 per cent to $24 million.
The value of Australian wine shipped to Europe was the highest since 2011–12, while shipments to South East Asia represent a financial-year record. The United Kingdom (UK), Germany and Scandinavia drove growth to Europe, while Singapore and Indonesia were the key drivers behind the growth to South East Asia.
Figure 3: Change in value of exports by region
Exports to mainland China increased by 0.7 per cent in value to $1.1 billion and decreased by 17 per cent in volume to 121 million litres (13 million 9-litre case equivalents). Average value increased by 22 per cent to $9.07 per litre FOB.
The growth in the average value was due to on-going growth in exports at higher price points, enough to offset the decline at the low-end. Exports at $10 or more per litre FOB increased by 11 per cent to $670 million, while those at less than $5 per litre FOB declined by 18 per cent to $211 million.
On 23 January 2020, the first COVID-19-related measures restricting the movement of people and closing non-essential businesses were implemented. Figure 4 illustrates that the pandemic has slowed value growth in exports to mainland China. The value of wine exported increased in the first two quarters of 2019–20 but it declined in the last two quarters.
Figure 4: Value of exports to mainland China by quarter (million AUD) – FY2019 v FY2020
United States of America
The impact of COVID-19 on exports to the United States of America (USA) has not been negative to date. In 2019–20, the value of exports declined by 0.4 per cent to $430 million and volume declined by 10 per cent to 137 million litres (15 million 9-litre case equivalents). The average value increased by 11 per cent to $3.13 per litre FOB.
Figure 5 illustrates that after declining by 12 per cent in the second quarter, the value of exports stabilised in the third quarter before increasing by 14 per cent in the fourth quarter. The increase in the fourth quarter came in price points below $7.50 per litre FOB.
Figure 5: Value of exports to the USA by quarter (million AUD) – FY2019 v FY2020
Exports to Canada declined by 6 per cent in value to $186 million and by 18 per cent in volume to 54 million litres (6 million 9-litre case equivalents). The average value increased by 15 per cent to $3.45 per litre FOB.
While both bottled and unpackaged wine drove the decrease in exports, unpackaged wine suffered greater losses. Unpackaged wine exports to Canada decreased by 20 per cent in value to $34 million, while shipments of wine in glass bottles declined by 2 per cent to $150 million. The volume decline was heavily skewed towards unpackaged wine shipments.
Figure 6 shows that the decline in value came predominantly in the first half of the financial year, partially offset by a 14 per cent increase in the fourth quarter. The growth in the fourth quarter was across all price points.
Figure 6: Value of exports to Canada by quarter (million AUD) – FY2019 v FY2020
In 2019–20, Australian wine exports to the UK increased by 3 per cent in value to $383 million, despite a 2 per cent reduction in volume to 232 million litres (26 million 9-litre case equivalents). Average value increased by 5 per cent to $1.65 per litre FOB.
There was growth at both low and higher price points, which offset declines in the middle:
- less than $2.50 per litre FOB, up 6 per cent to $220 million
- $2.50–4.99 per litre FOB, down 0.6 per cent to $102 million
- $5.00–7.49 per litre FOB, down 8 per cent to $23 million
- $7.50–9.99 per litre FOB, down 7 per cent to $13 million, and
- $10 or more per litre FOB, up 3 per cent to $24 million.
Figure 7 illustrates that buyers’ behaviour during the pandemic appears to have had a positive impact on Australian exports to the UK. After declining in the first three quarters, the value of exports increased by 43 per cent in the fourth quarter.
Figure 7: Value of exports to the UK by quarter (million AUD) – FY2019 v FY2020