In the year ended March 2023, Australian wine exports declined by 7 per cent in value to $1.90 billion1 and 1 per cent in volume to 620 million litres (69 million 9-litre case equivalents). Average value dropped by 6 per cent to $3.06 per litre free on board (FOB)2. The total value of exports was 18 per cent below the previous 10-year average of $2.30 billion, while volume was 15 per cent below the previous 10-year average of 726 million litres.
The decline in value was driven by a decrease in exports to the United Kingdom (UK), which continue to reduce following elevated shipments over the past two years due to pre-Brexit demand and COVID-19 induced changes in consumer preferences. In comparison, total shipment volume was relatively stable – with the large decline to the UK being outweighed by volume growth to the United States (US) and Canada, particularly in unpackaged wine, as global shipping conditions continue to improve.
These export results are representative of the incredibly tough conditions for Australian wine globally. Firstly, high inflation is squeezing consumer discretionary income, decreasing the amount consumers are willing to spend on luxury items such as wine. In the OECD, year-on-year inflation hit 9 per cent in January 2023, with the biggest contributors to the rise being food and energy prices – particularly in markets such as the UK3. This is accelerating the already established trend of wine losing share to other drinks categories and consumers lowering their alcohol intake in general. IWSR reports that the number of serves of wine in the top 20 markets globally fell by 5 per cent when comparing the first half of 2022 to the same period in 2021. Globally, the decline in the demand for wine is being felt the most in lower price segments, while premium wine is still finding growth as consumers purchase wine less frequently but are choosing to spend more on each wine product they purchase. This change disproportionally affects Australia, as a large share of exports are currently in lower priced products, and this is therefore impacting export performance.
The decreased demand for the entire wine category comes at a time when global wine supply has been relatively stable for the past four years – but also well above demand. Ciatti, a wine brokerage firm, has indicated that even though supply from the Southern Hemisphere is expected to be far below average this year, this has not generated extra interest from bulk wine buyers in the global market – particularly for red wine4 – as globally supply and demand are out of balance.
Taking a long-term view of Australian wine export performance (see Figure 1), these trends are most reflected in traditional markets such as the US and the UK, where Australia is heavily exposed to the decreased demand in lower price tiers. Performance in Canada and New Zealand has been more stable, while Hong Kong and Singapore have grown in recent times due to their status as trade hubs in the Asian region. Diversification into emerging markets, where the wine category is still in its infancy, has been on the rise, with the combined value of “Other Asia” (in this example, all Asian markets aside from Hong Kong, Singapore, and mainland China) overtaking the value exported to Canada in recent years. The markets driving this growth were Thailand, Malaysia, South Korea, Taiwan, and Indonesia.
Figure 1: Rolling year ended wine export value to key markets over time
Destinations
In the year ended March 2023, Australian wine exporters shipped to 118 destinations, up from 112 in the previous year. In the past 12 months, the strongest growth was in exports to Southeast Asia, up 9 per cent to $301 million. Offsetting this growth was a decline in exports to North America, down 5 per cent to $557 million, and to Europe, down 17 per cent to $568 million. European markets are experiencing tough operating conditions resulting from economic challenges and conflict in the region. Northeast Asia also declined, down 5 per cent to $318 million.
Figure 2: Export value growth/decline by region
United States
In the year ended March 2023, Australian wine exports to the United States (US) declined by 8 per cent in value to $381 million and increased by 15 per cent in volume to 146 million litres. The decline in value with the increase in volume resulted in a drop of 20 per cent in average value to $2.60 per litre FOB.
The growth in volume was entirely driven by unpackaged wine shipments, which increased by 80 per cent in volume to 85 million litres. Meanwhile, the decline in value was driven by packaged products – down 18 per cent to $278 million. This decline took place in shipments valued between $2.50 and $7.49 per litre. Also contributing to the overall value decline was the shift towards unpackaged products (which are inherently lower in value as they do not include packaging costs); they grew from a 37 per cent volume share in 2022 to 58 per cent in 2023. While exports valued above $10 per litre declined by 10 per cent to $47 million, there were some pockets of growth – such as between $30 and $100 per litre.
In the year ended 2 April 2023, the total US off-trade market declined by 4 per cent in volume and 0.1 per cent in value. The commercial end of the market (below US$11 per bottle) declined by 8 per cent, while growth at the premium end (above US$11 per bottle) has levelled off, resulting in no volume growth in the past 12 months. These figures show a slight softening of the premium segment compared to the previous quarter, which could be a result of consumers restricting wine consumption as tough economic conditions impact disposable income. However, Australian wines priced between US$15 and US$25 per bottle outpaced the market in growth – up 12 per cent during the year, mostly driven by Cabernet Sauvignon.
Canada
Australian wine exports to Canada grew by 2 per cent in value to $174 million and 44 per cent in volume to 73 million litres. This resulted in a 29 per cent drop in average value to $2.39 per litre.
While packaged exports declined by 7 per cent in both volume and value to 21 million litres worth $130 million, it was the increase in unpackaged wine that shifted total volume and value most significantly. Unpackaged wine shipments increased by 86 per cent in volume to 52 million litres and 44 per cent in value to $44 million. Volume growth outpacing value growth resulted in a decrease in average value by 23 per cent to $0.86 per litre FOB. The decline in average value of unpackaged shipments, plus their increase in overall volume share from 55 per cent to 71 per cent of shipments to Canada, has impacted on overall value in the market.
The decline in packaged shipments occurred mostly in the $5 to $7.49 price segment, which declined by 18 per cent to $53 million. While shipments with an average value above $10 per litre declined by 4 per cent to $25 million, this was mostly in shipments valued between $10 and $15 per litre. Exports above $15 per litre grew by 39 per cent to $8.0 million.
United Kingdom
In the year ended March 2023, exports to the United Kingdom fell by 20 per cent in value to $359 million and 16 per cent in volume to 208 million litres. Average value declined by 5 per cent to $1.73 per litre FOB.
There has been considerable fluctuation in export levels to the UK over the past few years, which was largely attributable to the process of leaving the European Union (which commenced in 2016) and the COVID-19 pandemic. In 2020, there was a steep rise in exports caused by these two factors working together. Brexit led to an increase in exports due to the demand of getting products into market before the transition came to a close, and the off-trade category (where Australia’s holds the number one position) benefitting from the closure of the on-trade during the COVID-19 pandemic, which led to a further increase in exports to the UK.
As the on-trade re-opened in 2021 and 2022, there was a counter-swing in the demand for Australian wine as Australia’s share in the on-trade is substantially lower than that of the off-trade. Export value has now returned to a similar level as it was pre-Brexit. However, the UK is experiencing deep economic hardship, and the upcoming onset of additional duties on wine will squeeze margins for companies in the market, so it is likely that Australian exports to the UK will continue to decline in the short to medium term.
Asia
Exports to Asia grew by 0.4 per cent to $633 million. Growth was driven by markets in Southeast Asia, which increased by 9 per cent to $301 million. Offsetting this growth was a decline in exports to Northeast Asia, down 5 per cent to $318 million.
The main contributor to the decrease in Northeast Asia was mainland China, which continued its decline – down 55 per cent to $11 million. Overall exports to Japan and South Korea also declined, down 9 and 7 per cent respectively, driven by exports with an average value between $2.50 and $7.49 per litre. However, exports above $10 per litre to both markets showed good growth.
All destinations in Southeast Asia grew in volume, while Singapore was the only market to decline in value – down 20 per cent to $134 million. Singapore remains the number one destination in Southeast Asia for Australian wine exports but as a trading hub some of the wine is on-shipped to other Asian markets. As with all trading hubs globally, export levels can vary to these types of markets depending on changes in business practices of shipping directly to the selling destination or vice versa.
The main contributors to growth in the region were Thailand (up 59 per cent to $60 million) and Malaysia (up 57 per cent to $57 million). Across the region, there was growth at both ends of the price spectrum; exports with an average value below $5 per litre grew by 45 per cent in value to $40 million, while exports above $5 per litre grew by 5 per cent to $261 million.
For further analysis, please see the Export Report.
For more detailed data, please go to the Export Dashboard.
1. Unless otherwise stated all values are given in Australian dollars.
2. All export wine values are the ‘Free on board' (FOB) value of the wine, where the point of valuation is where goods are placed on board the international carrier, at the border of the exporting country. The FOB value includes production and other costs up until placement on the international carrier but excludes international insurance and transport costs.
3. OECD – March 2023 update on consumer prices
4. Ciatti Global Market Report March 2023