The United Kingdom (UK) was the number one destination for Australian wine exports by volume in 2020, a position it has held since electronic export records commenced in 1990. After a downward trend in volumes since 2010 (see Figure 1), the volume of exports to the UK rebounded strongly in 2020, up 19 per cent to 267 million litres (29.6 million 9-litre case equivalents). This places the UK well head of the United States (136 million litres) and mainland China (96 million litres).
The value of exports to the UK also increased, up 29 per cent to $456 million, placing the UK as the second biggest destination by value. It is important to note that 85 per cent of Australian wine exported to the UK is shipped unpackaged and then packaged in-market. Not all of the wine exported is sold in the UK as some is then re-exported to other countries in Europe.
Figure 1: Volume of Australian wine exports to the UK (million litres)
Source: Wine Australia
Australian wine exports to the UK have been on the rise since April 2020, in response to growing demand for wine in the UK market following the pandemic as well as some companies sending wine into the market ahead of the end of the Brexit transition period. IRI Worldwide reports that in 2020, Australian sales in the UK off-trade market increased by 13 per cent in value and 9 per cent in volume. Australia has been the number one country of origin in the UK off-trade market for twenty years. Australia held a 22 per cent market share by value, ahead of Italy and the United States each with 12 per cent.
The increase in off-trade sales made up for the loss of on-trade business impacted by closures due to the pandemic. Australia’s share of the on-trade was already much lower than in the off-trade, ranking third behind Italy and France. While the loss in on-trade volume was offset in the off-trade, this came at the expense of price. Smaller, more expensive brands in the on-trade did not necessarily find a home in the off-trade.
For Australian wine, the growth in the off-trade market was across most price points from the big brand commercial end through to the premium wine segments. The strongest rates of growth were between £9 and £20 per bottle, albeit off much smaller bases compared to the commercial end (see Figure 2).
Figure 2: Australian wine sales by price point in the UK off-trade in 2020 (million 9-litre case equivalents)
Source: IRI Worldwide
By variety, there was strong growth in Australia’s two biggest selling varietal wines in the UK, Shiraz (up 15 per cent) and Chardonnay (up 9 per cent), as well as the others in the top five, Merlot (up 12 per cent), Pinot Grigio (up 31 per cent) and Sauvignon Blanc (up 12 per cent). Rosé also recorded double-digit growth for Australia, up 10 per cent.
One key outcome of the market disruption due to the pandemic is the increase in online sales. Wine Intelligence reports that 25 per cent of regular wine drinkers in the UK purchased wine from a supermarket website in 2020, up from 21 per cent in 2019 and 20 per cent in 2015. Furthermore, 15 per cent indicated they purchased wine from a specialist online retailer in 2020, suggesting a significant shift for premium online in 2020.
Wine Intelligence also reports seeing more interest in other forms of packaging beyond the traditional 750ml bottle. For example, over 40 per cent of wine drinkers are aware of less known packaging types such as pouches and wine in a can. There has also been growing awareness of regular bag-in-box, driven by convenience, value and environmental consciousness. However, a key barrier to purchase in bag-in-box as well as pouches and wine in cans is the perception that these packaging types typically contain lower quality wine.
Figure 3: Awareness of packaging types among regular wine drinkers in the UK (% of those aware of the packaging type)
Source: Wine Intelligence, UK Wine Landscapes 2021
Wine Australia’s Regional General Manager UK/EMEA, Laura Jewell MW, said, ‘Despite the ongoing restrictions in the UK due to the Covid-19 pandemic, Australian wine has been able to build on its success in the off-trade as consumers stuck to the tried and trusted brands that they recognize’.
‘Several of the larger brands have seen new styles and formats listed in the last 12 months in the multiple retailers. While the hospitality industry continues to face an uncertain future, with no roadmap for reopening post the current lockdown, the independent retailers who have moved into or developed their online and home delivery services have seen significant growth in more premium wine sales.
‘While the UK is a mature market, this last year has shown that it is still open for business for Australian wine.’