Australian wine exports decreased by 30 percent in value to $2.03 billion and 17 percent in volume to 619 million litres in the year ended December 2021, according to Wine Australia’s latest Export Report.
In the 12 months to 31 October 2020 exports reached a record $3.1 billion – we have now lost $1.07 billion in trade in the past 18 months.
Rachel Triggs, Wine Australia General Manager Corporate Affairs and Regulation, says the figures are reflective of the tough market conditions over the past 12 months as a result of deposit tariffs imposed on bottled Australian wine imported to mainland China, the continuing impact of the global freight crisis, and a counter-swing in some markets after Covid-19 related stockpiling in 2020.
Exports to mainland China declined by 97 percent in value to $29 million and by 93 percent in volume to 6.4 million litres, a loss of nearly $1 billion in value and 90 million litres in volume, when compared 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 very high 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,” Ms Triggs says.
“Because the export figures are compared to the prior 12-months, we’ll keep seeing significant differences in the year-to-date export figures as a result of the deposit tariffs until the end of 2022.
“Exports excluding mainland China increased by seven percent in value to $2 billion and decreased by six percent 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 markets with the largest increase in value of Australian wine exports were Singapore (up 108 percent to $166 million), Hong Kong (up 45 percent to $191 million), South Korea (up 74 percent to $47 million), Taiwan (up 65 percent to $31 million) and Thailand (up 31 percent to $28 million).
Exports valued at above $10 per litre FOB increased in value by 49 percent when excluding mainland China, giving positive signs that demand for products which would previously have been exported to China is emerging in other markets and highlighting the importance of the Australian grape and wine sector investing in market diversification.
“The pandemic is still disrupting the on-trade, the global freight crisis is continuing to cause shipping delays and increased freight costs, and while there was export growth to many destinations, it will take time to offset the loss in trade to mainland China. This is not something that will happen overnight, nor within a year. But the Australian wine sector is resilient, and there are early signs that hard work in expanding and diversifying markets is paying off,” Ms Triggs said.
Figure 1: Export value (million AUD, FOB) – mainland China versus the rest of world.
The decrease in volume, aside from mainland China, was 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 and were impacted by the global freight crisis later in 2021.
A total of 63 million litres was shipped in the month of December 2021, representing the largest month of exports since October 2020.
However, 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 was also attributed to low wine inventory levels at the start of 2021 after three small vintages and delays in getting the large 2021 vintage onto ships due to the ongoing global freight crisis.
In the 2021 calendar year, 201 million litres of 2021 vintage wine was shipped, which is about 10 per cent less than the 2017, 2018, and 2020 vintages at the same time in their respective years, and seven percent ahead of where the 2019 vintage was at this stage.
“A relatively high share of the small 2020 vintage was brought forward to ship in 2020, leaving a smaller amount left to ship in 2021,” Ms Triggs said.
“The 2020 vintage was the smallest vintage since 2007 and much of it was shipped in 2020 to the UK and the US in response to increased demand for Australian wine during Covid-19 and ahead of the Brexit transition conclusion.”
The global freight crisis emerged in the second half of 2021, hampering exporters’ ability to get wine into markets – particularly in the US and Europe.
Logistics companies Hillebrand and Flinders Port Holdings reported that 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 and other factors – led to port congestion, worst ever schedule reliability and increased costs.
“Exporters experienced both increased delay times and increased costs of containers over the past year,” Ms Triggs said.
“Flinders Port Holdings reported that Australia also represents only one percent of global container throughput, so we are at the mercy of bigger international players with this increased demand for freight. The crisis is not expected to be resolved before the end of 2022.”
In the year ended December 2021, Australian exporters shipped wine to 112 markets, compared with 114 the year before.
The top five markets by value were:
- UK, down one percent to $453 million
- US, down seven percent to $403 million
- Hong Kong, up 45 percent to $192 million
- Singapore, up 108 percent to $166 million, and
- Canada, down 14 percent to $164 million.
The top five markets by volume were:
- UK, down nine percent to 243 million litres
- US, down eight percent to 125 million litres
- Canada, down 16 percent to 47 million litres
- Germany, down one percent to 34 million litres, and
- New Zealand, down seven percent to 31 million litres.
Australian wine exports to the UK decreased by one percent in value to $453 million and nine percent in volume to 243 million litres (27 million 9-litre case equivalents). Average value increased by nine percent to $1.87 per litre FOB, the highest level in more than ten years.
An extraordinary level of shipments to the UK took place during quarter two through quarter four of 2020, when compared to 2019. Pleasingly, this level of shipments was largely upheld in 2021, which is consistent with IRI Worldwide data from the UK off-trade that shows overall wine sales in 2021 are more comparable to 2020 sales than pre-pandemic 2019 levels. As Australia is the number one source of wine in the off-trade, it is benefitting from this. Australian wines managed to outpace the overall market in value growth, growing by two percent in value, while the total off-trade wine market declined by three percent.
United States of America
Australian wine exports to the US decreased by seven percent in value to $403 million and eight percent in volume to 125 million litres (14 million 9-litre case equivalents). Average value increased by one percent to $3.23 per litre FOB.
The 2021 calendar year was a tough period for Australian wine exporters to the US. This is most evident in quarter two, where export value fell by 29 percent compared to the same quarter in 2020. However, quarter four started to show signs of renewed growth; export value increased by nine percent compared to the same quarter in 2020. In both quarters of the second half of 2021, value exceeded that of 2019 (pre-Covid-19).
Although total export value to the US declined during 2021, most of this decline was below $5 per litre with exports with an average value above $5 per litre increasing in value by 13 percent to $84 million. Exports with an average value of $10 per litre or more increased by 20 percent to $48 million, the highest value since November 2009.