High off-trade consumption in UK grows demand for Australian wine

Market Bulletin | Issue 219
15 Sep 2020
Previous  News

In a reversal of recent trends, in 2019–20 Europe became the growth centre for Australian wine exports (see Figure 1). The destination market behind this growth is Australian wine’s number one export market by volume – the United Kingdom (UK).

Figure 1: Year-on-year export value change by destination region, year ended June 2020

Source: Wine Australia

In the year ended June 2020, Australian wine exports to the UK declined by 2 per cent in volume to 232 million litres but increased in value by 3 per cent to $383 million. While this does not seem like extreme growth, it is a large improvement from the figures for the year ended January 2020, where both volume and value fell by 12 per cent (see Figure 2). The downward trend of exports in 2019 reflected the end of moves by larger brands to get their product into market ahead of the UK leaving the European Union – the driver behind the large growth figures in 2018.

Figure 2: Year-on-year percentage change in export volume and value to the UK

Source: Wine Australia

Behind this growth was an impressive performance in exports in the fourth quarter (March–June 2020). As illustrated in Figure 3, exports during the fourth quarter grew by 43 per cent in value, compared with the same quarter in the previous year, to $117 million – the largest fiscal quarter by value since the quarter ended September 2011. Volume also grew – by 24 per cent to 68 million litres.

Figure 3: Export value by quarter to the UK

Source: Wine Australia

The fact that value growth outpaced volume growth in the fourth quarter has led to the highest average value of exports since 2011, at $1.65/litre (see Figure 4). This average value reflects that, on an annual basis, about 85 per cent of the volume of exports to the UK is unpackaged, meaning the value excludes packaging costs. Much of the quarterly increase in exports came from unpackaged wine, growing by 46 per cent in value to $71 million. However, bottled wine also grew, by 39 per cent to $46 million.

Figure 4: Average value per litre of exports to the UK

Source: Wine Australia

A review of exports by price segment reveals that, although all price segments increased from the previous year, much of the increase is at lower price segments (see Figure 5). Exports below $2.50 per litre increased by 45 per cent, while exports above $10 per litre increased by 15 per cent.

Figure 5: Exports to the UK by price segment, fiscal quarter 4

Source: Wine Australia

The wine styles driving the growth in the fourth quarter are not surprising (see Figure 6). The traditional styles of red and white still wine have grown almost equally in percentage terms for both unpackaged and bottled wine. Rosé wine has also continued to grow throughout this tumultuous period. Also, not surprising is the decline in the exports of sparkling wine, given the lack of occasions for sparkling wine consumption in the last 6 months.

Figure 6: Change in export value by container type and wine style, fourth quarter 2020 vs 2019

Source: Wine Australia

So, what is behind this extraordinary growth in the last quarter?

According to IRI Worldwide, the beer, wine, and spirits (BWS) category has been one of the strongest performing sales categories throughout lockdown, even now that restrictions are easing. Since the beginning of 2020 up to the week ending 5 September, the BWS category has grown by £1.6 billion compared to last year. Wine is consistently the top growth category by value, growing by 23 per cent in the week ending 5 September.

Figure 7: Category performance by units and value change for the week ending 5/9/2020

Source: IRI Worldwide

According to Wine Intelligence, UK regular wine consumers increased their frequency of wine consumption during lockdown, more than compensating for the lack of on-trade occasions.

Since Australian wine dominates the UK off-trade – it has been number one for decades – it is not surprising that exports have lifted in the past few months given the growth in the overall market.

At seems, at least for now, that drinking at home is a habit that is sticking around. According to surveys conducted by Kantar in August 2020, ‘drinking at home’ is up by 28 per cent compared to 2019 and showing no sign of returning to normal. This could be due to consumers not yet being comfortable with going out for a drink or a meal, or even if they are comfortable, are slow to get into the habit of going out again. The Kantar survey suggests that, while 51 per cent of respondents said they were comfortable visiting restaurants (33 per cent for bars), 51 per cent of those people have not yet visited (74 per cent for bars).

Another trend is that, although off-trade sales have been slowing slightly as lockdown eases, online sales are still strong. 13.5 per cent of all grocery sales were through online channels during the 4 weeks ending 9 August and online alcohol sales grew by 127 per cent.

The market is cautiously shifting back toward normalcy, with the on-trade continuing to open (85 per cent of outlets were open in August), and children returning to in-person schooling last week. But for now, off-trade consumption is the custom and Australia wine exports are benefitting.


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