In the year ended December 2021, Australian wine exports decreased significantly by 30 per cent in value to $2.03 billion and 17 per cent in volume to 619 million litres (69 million 9-litre case equivalents). This resulted in a 15 per cent drop in average value to $3.27 per litre.
The biggest driver of the decline was the reduction in exports to mainland China, following the imposition of import tariffs on Australian packaged wine in November 2020 Exports to mainland China declined by 97 per cent in value to $29 million and by 93 per cent in volume to 6.4 million litres, a loss of nearly $1 billion in value and 90 million litres in volume, when comparing to the 2020 calendar year where shipments were free from tariffs for most of the year.
The 2021 calendar year represents the first full 12-month period since deposit tariffs on Australian wine imported to China were imposed and the global impact of the challenging operating environment can now be observed in full. Because the export figures are compared to the prior 12-months, the impacts of the deposit tariffs will continue to be evident in comparing year-on-year data until the end of 2022.
Exports excluding mainland China increased by 7 per cent in value to $2 billion and decreased by 6 per cent in volume to 613 million litres. This is the first time that exports excluding mainland China have reached $2 billion for a calendar year since 2009. The largest drivers of the increase in value were Singapore, Hong Kong, South Korea, Taiwan and Thailand. The decrease in volume, aside from mainland China, was felt mostly in shipments to the United Kingdom (UK), United States of America (US) and Canada, where export volumes surged in 2020 due to COVID-19 induced stockpiling in the off-trade and are now normalising. The pandemic is still disrupting global markets, and while there is export growth to many destinations, it will take some time to offset the loss in trade to mainland China.
Figure 1: Export value, mainland China versus rest of world
The 619 million litres shipped in total for the 2021 calendar year represents the lowest volume shipped in a 12-month period since the year ended September 2004. Aside from the loss of shipments to mainland China, the significant drop in volume can also be attributed to low inventory at the start of the year after three small vintages and delays in getting the large 2021 vintage onto ships due to the ongoing global freight crisis.
The crisis in global transportation emerged in the second half of 2021, hampering exporters’ ability to get wine into markets – particularly in the US and Europe. The combination of a fundamental shortage of container ships and a sudden and strong rebound in global demand driven by the US and China – compounded by COVID-19 related labour shortages, industrial action and other factors – have led to port congestion, worst ever schedule reliability and increased costs that escalated and snowballed between August and December 2021. For example, in October 2021 the global average for delayed ships was between 7 and 8 days late, compared to around 4 days in 2019. Costs of freight (when ships are available) have also substantially increased. The World Container Index assessed by Drewry indicates that container costs have nearly doubled during 2021, from just under $5,000 per 40-foot container in December 2020, to nearly $10,000 in December 2021 [1]. Making this even worse for Australian exporters is that Australia represents only 1 per cent of global container throughput, putting them at the mercy of much bigger players in the marketplace [2]. In the 2021 calendar year, 201 million litres of 2021 vintage wine was shipped. This 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. Figure 2 also illustrates the relatively high share of the small 2020 vintage that 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 13 per cent below the 10-year average, and much of it was shipped in 2020 to the UK ahead of the Brexit transition conclusion, and to the UK and the US in response to increased demand for Australian wine during COVID-19.
Figure 2: Export volume by vintage and departure year
Destinations
In the year ended December 2021, Australian exporters shipped wine to 112 destination markets, compared with 114 the year before. The most significant growth came from exports to Southeast Asia, up 53 per cent to $262 million, but also from other Asian markets such as India (up 81 per cent), and the Middle East (up 22 per cent). This growth was offset by a decline in exports to Northeast Asia, down 72 per cent to $348 million, and North America, down 9 per cent to $569 million.
Figure 3: Change in the value of exports by destination region
The top five markets by value were:
- UK, down 1 per cent to $453 million
- US, down 7 per cent to $403 million
- Hong Kong, up 45 per cent to $192 million
- Singapore, up 108 per cent to $166 million, and
- Canada, down 14 per cent to $164 million.
The top five markets by volume were:
- UK, down 9 per cent to 243 million litres
- US, down 8 per cent to 125 million litres
- Canada, down 16 per cent to 47 million litres
- Germany, down 1 per cent to 34 million litres, and
- New Zealand, down 7 per cent to 31 million litres.
United States of America
In the year ended December 2021, exports to the US decreased by 7 per cent in value to $403 million and 8 per cent in volume to 125 million litres (14 million 9-litre case equivalents). Average value increased by 1 per cent to $3.23 per litre.
The 2021 calendar year was a tough period for Australian wine exporters to the US, with the first three quarters showing declines compared to the year before. This was most evident in quarter 2, where export value fell by 29 per cent compared to the same quarter in 2020. However, quarter 4 started to show signs of renewed growth; export value increased by 9 per cent compared to the same quarter in 2020. In both quarters of the second half of 2021, value exceeded that of 2019 (pre-COVID). In total, there were 20 additional exporters to the US in 2021 compared to 2020, bringing the total number of exporters to 289.
Figure 4: Export value to the US by quarter (Million AUD FOB)
Although total export value to the US declined during 2021, most of this decline was for shipments at an average value below $5 per litre. Exports with an average value above $5 per litre increased in value by 13 per cent to $84 million.
Exports with an average value of $10 per litre or more increased by 20 per cent to $48 million, the highest value since November 2009. Of the 75 exporters who shipped wine to the US in 2021 and not the previous year, 49 of them shipped wine in this price segment.
Canada
In the year ended December 2021, Australian wine exports to Canada decreased by 14 per cent in value to $164 million and 16 per cent in volume to 47 million litres (5.2 million 9-litre case equivalents). Average value increased by 2 per cent to $3.53 per litre.
Figure 5: Export value to Canada by quarter (Million AUD FOB)
Exports in 2021 have been lower than 2020 since quarter 2 (see Figure 5) and the difference was amplified by the fact that exports surged in quarter 2 through quarter 4 of 2020 due to COVID-19 induced stockpiling in the off-trade, where most Australian wine is sold. According to wine sales data from the Association of Canadian Distillers, Australia’s decline in sales is largely consistent with other source countries, including domestically produced wines. This indicates that total sales are starting to return to pre-pandemic levels.
United Kingdom
In the 12 months to December 2021, exports to the UK decreased by 1 per cent in value to $453 million and 9 per cent in volume to 243 million litres (27 million 9-litre case equivalents). Average value increased by 9 per cent to $1.87 per litre, the highest level in more than ten years.
Figure 6: Export value to the UK by quarter (Million AUD FOB)
Figure 6 illustrates the extraordinary level of shipments to the UK that took place during quarter 2 through quarter 4 of 2020, when compared to 2019. This level of shipments was largely upheld in 2021. This is consistent with data from the UK off-trade which shows that wine sales in 2021 are still much more comparable to 2020 sales than pre-pandemic 2019 levels [3]. As Australia is the number one source of wine in the off-trade, it is benefitting.
Other destination markets
There were also positive performances outside of the top markets. Most notably in South Korea, up 74 per cent to $47 million, Taiwan, up 65 per cent to $31 million, and Thailand, up 31 per cent to $28 million. Exports to India increased by 81 per cent to $12 million. This is the largest value ever shipped to India, with 10 exporters shipping there in the past 12 months who did not ship there in the previous 12 months. Additionally, exports to Japan increased by 6 per cent to $47 million, a positive sign for the market which has been in decline for nearly two years.
Figure 7: Change in value, largest growth markets outside top five
*Markets ranked in order of total exports by value
The Export Report is available here. Additional export data can be accessed through the Export Dashboard.
1 Hillebrand
2 Flinders Port Holdings Group
3 IRI Worldwide