The Australian wine sector continues to be challenged by the well documented “perfect storm” of global trading conditions. Among these was the introduction of significant deposit tariffs on Australian bottled wine to mainland China in November 2020, after which a third of the sector’s global export value was lost and has not been recovered. Adding more pressure to the sector was the record-sized vintage crop in 2021. While the 2022 vintage was smaller and just below the five-year average, it is expected that the forthcoming Production, Sales and Inventory Report 2022 will show that wine inventories have increased to an undesirable level. While adjustments may need to be made to supply, it is also crucial that the sector grows demand and the premium paid for Australian wine in both existing and emerging export markets.
Market data from IWSR shows that global sales of commercial/value wines (less than US$10 per bottle) have been in decline while the premium wine segment (US$10 or more per bottle) have been increasing. The IWSR has forecast commercial/value sales to continue to decline out to 2026, although at a lower rate of decline than the previous five years. On the other hand, they expect growth to continue in premium wine sales. Within each segment, there are different opportunities in different markets.
To assist Australian wineries in assessing market opportunities, Wine Australia has analysed IWSR wine sales data for the top 50 wine markets to determine the size of the opportunity for both the commercial/value and premium wine segments. The factors examined include:
- size of the imported wine market
- absolute value growth in last five years
- forecast absolute value growth in next five years, and
- Australia’s market share.
This Market Bulletin presents a quantitative analysis of the data with the goal to determine the potential size of the opportunity in value terms by market and price segment. Wine businesses must also consider other factors such as market access, ease of doing business, economic conditions, social factors and capacity to spend on discretionary products like wine. Furthermore, businesses must make their own assessment based on their individual circumstances and strategic plans.
Premium imported wine markets
Figure 1 illustrates the relative opportunity for each market for premium wines (US$10 or more per bottle). The size of the bubble shows the size of the imported wine market by value (US$) while the markets with the strongest historical and forecast growth are in the top right-hand corner of the chart. Conversely, the markets that have been declining and forecast to continue to decline are in the bottom left-hand corner.
The premium wine export markets that stand-out in size of market, historical and forecast value growth for premium wines and where Australia has a relatively low market share (Australia’s market share is in brackets) are:
- North America – United States (6 per cent), Canada (8 per cent) and Mexico (1 per cent)
- Europe – United Kingdom (9 per cent), Netherlands (12 per cent), Germany (3 per cent), Belgium (3 per cent), Denmark (4 per cent) and Switzerland (3 per cent), and
- Asia – South Korea (4 per cent) and Japan (6 per cent).
In Europe, Ireland (8 per cent) and Sweden (2 per cent) are major markets in that have been growing and forecast to slow through to 2026 but there is upside for Australia (see Figure 2).
Smaller but growing markets in Asia and where Australia is well-placed in terms of market share are Singapore (25 per cent), Taiwan (16 per cent), Thailand (21 per cent), Vietnam (20 per cent) and Indonesia (22 per cent).
Australia has a very small share of premium sales in Brazil (0.01 per cent) and India (8 per cent). Brazil is a much larger premium wine market than India.
Figure 1: Premium imported wine markets – size of market and historical and forecast value growth
Source: IWSR and Wine Australia analysis
To assess the potential upside in sales of Australian wine in the premium segment across the selected most attractive markets, a scenario was prepared where Australia increases its market share of the premium wine segment by three percentage points by 2026. The results are shown in Figure 2. The table also highlights markets where Australia has a trade agreement with either zero or reducing import tariffs.
Across the selected markets, growing Australia’s share by three percentage points would yield an additional US$1 billion and 6 million cases (54 million litres) in retail sales by 2026.
For premium wines, the biggest opportunity is in the United States, United Kingdom and Canada. All three are large premium wine markets and premium sales have been and are forecast to continue to grow and Australia has a relatively small current market share. The monopoly provincial liquor boards in Canada provide additional challenges in this market.
Japan leads the next batch of markets in terms of upside followed by a range of markets similar in scope including Netherlands, Denmark, Ireland, South Korea, Germany and Singapore.
Figure 2: Australia’s position and potential upside in the selected imported premium wine markets
Source: IWSR and Wine Australia analysis
Within the overall premium imported segment, there are sub-segments within each market. Figure 3 shows the sub-segments within each market where the biggest opportunity for growth is likely to be for Australian wine. The segments have been converted to an equivalent Australian retail segment but is indicative and treated as a guide only. In most of the selected markets, the biggest opportunity for Australia are in segments that equate to an Australian retail market price of between A$10.00–29.99 per bottle. This is not suggesting that there is not an opportunity at higher price segments, it just means that the size of the opportunity is smaller.
Figure 3: Australia’s position and potential upside in the selected imported premium wine markets
Source: IWSR and Wine Australia analysis
Commercial/value imported wine markets
The same analytical methodology that was conducted on the premium imported wine markets was also applied to the commercial/value imported wine markets (less than US$10 per bottle). The relative market opportunities for commercial/value wines are illustrated in Figure 4. As mentioned earlier in this Bulletin, global sales of commercial/value wines have been in decline, and this is shown clearly in the chart where the biggest markets are in decline while the growth is coming in smaller and emerging markets.
The biggest imported wine markets and where Australia has a relatively high market share are in decline for the commercial/value segment (Australia’s market share is in brackets) – United States (15 per cent), United Kingdom (25 per cent) and Canada (18 per cent). This suggests that there is little opportunity to grow commercial/value sales in these markets and the growth opportunity is likely to be in the emerging wine markets across Asia.
The markets that are showing growth are smaller in size and Australia also has a low market share (in brackets)
- North America – Mexico (1 per cent)
- South America – Brazil (0.03 per cent)
- Europe – Poland (2 per cent), and
- Asia – South Korea (8 per cent), Japan (6 per cent) and Vietnam (9 per cent).
Australia is well-placed in the commercial/value segment in smaller but growing Asian markets including Thailand (38 per cent), Taiwan (18 per cent), Singapore (34 per cent), India (45 per cent) and Indonesia (49 per cent).
Figure 4: Commercial/value imported wine markets – size of market and historical and forecast value growth
Source: IWSR and Wine Australia analysis
Given that the biggest and mature commercial/value imported wine markets are in decline, the potential upside for commercial/value wines is much smaller than for premium wines, based on the trends. Applying the same scenario of increasing Australia’s market share of commercial/value wine sales by 3 percentage points across the selected markets that are growing would increase Australian commercial sales by US$270 million and 2.4 million cases (22 million litres) (refer to Figure 5).
The biggest upside for commercial/value wine by value is in Brazil, Japan, South Korea, Indonesia, Poland, Thailand and India.
Figure 5: Australia’s position and potential upside in the growing imported commercial/value wine markets
Source: IWSR and Wine Australia analysis
The same scenario was also applied to the biggest commercial/value wine markets (see Figure 6). These markets are forecast to decline, and the analysis shows that even if Australia increased its share by three percentage points, the upside is relatively small. It is more challenging to grow sales significantly in a declining market. For the biggest market, the United Kingdom, even if Australia increased its market share, overall sales would still fall because the market is in decline.
Figure 6: Australia’s position and potential upside in the biggest imported commercial/value wine markets
Source: IWSR and Wine Australia analysis
Summary
The quantitative analysis conducted by Wine Australia using the IWSR data highlights the most attractive markets by the size of the market and historical and forecast growth. Figure 7 summarises the results by price segment and geographical region. It highlights that the biggest opportunities for premium wines are in established and mature markets and requires intensifying the sector’s marketing efforts in these markets. In addition, there is also an opportunity for Australian premium wines to diversify into emerging markets and/or where Australia’s market share is relatively small. While individually the emerging markets in Southeast Asia are smaller, as a cluster of markets the opportunity is significant.
For commercial/value wines, established markets are in decline so the opportunity for growth is likely to be greater by diversifying into the smaller but growing emerging markets. This analysis is not suggesting that wineries should abandon the commercial/value segments in the major established markets but merely that the opportunities for future growth may be limited.
Figure 7: Summary of most attractive markets by price segment
Source: IWSR and Wine Australia analysis
The analysis presented in this Bulletin is quantitative and is designed to be the first step in assessing market opportunities. It is critical to take a deeper dive into understanding other market and consumer insights as well as critical operating influences in each market such as political, economic, social, technological, environmental and legal/regulatory factors.
In the coming weeks, Wine Australia will provide a summary of key insights and drivers in each of the markets to provide a deeper understanding beyond the data analysis. Wine Australia is also available to discuss the market opportunities analysis with individual companies and regional associations either in-person or via the Ask an Analyst booking tool.