The Australian wine industry is seeing signs of stock adjustment, but red stocks remain high, according to the Australian Wine Production, Sales and Inventory Report 2024 released by Wine Australia.
Total sales of Australian wine exceeded production for the second year in a row, following successive small vintages.
Wine production was just over one billion litres (116 million 9-litre case equivalents), an eight percent increase compared with 2022-23 but still the second-smallest reported production in 17 years, and 16 percent below the 10-year average of 1.24 billion litres.
Peter Bailey, manager, Market Insights at Wine Australia, said that the below-average production from the small 2024 vintage was the result of a combination of seasonal factors and economic and market conditions.
“This was another difficult season in many regions, with heavy rainfall and flooding, widespread windy conditions affecting flowering, and dry spring weather leading to cold nights and the potential for frost damage,” Mr Bailey said.
“However, the result has also stemmed from deliberate decisions by grapegrowers and wine businesses to reduce production or intake, driven by the current economic and market conditions affecting demand for wine.”
The overall increase of eight percent compared with 2022-23 was made up of a 20 percent increase in white wine production, partly offset by a two percent decrease in red wine production. This saw white wine’s share of production increase from 46 percent to 51 percent – the first time in 12 years that the production of white wine has exceeded that of red wine in Australia.
Mr Bailey said that this change reflected adjustments made by the sector to counter the oversupply of red wine that had arisen over the past three years.
Sales volume decline despite reopening of China market
The total volume of sales of Australian wine in export and domestic markets was 1.08 billion litres (120 million 9-litre cases). This was a decrease of one percent compared with 2022-23, with both domestic and export sales showing very small declines. Contrary to the change in share of production, white’s share of total sales declined due to four percent growth in red wine exports.
Mr Bailey explained that the growth in red wine exports was driven by the re-commencement of exports to mainland China following the removal of import tariffs in late March 2024. The volume of exports to China grew from one million litres to 32 million litres (five percent of total wine exports) in the 2023-24 financial year, almost all of which (96 percent) was red table wine. However, he cautioned that this was likely to represent the restocking of Australian wine in the market after a long absence, and did not necessarily equate to retail sales.
“It will take some time before there is a clearer picture of how Chinese consumers are responding to the increased availability of Australian wine in-market.”
Two consecutive small vintages contribute to reduction in stock overhang
Despite the decline in sales, the below-average production meant that sales exceeded production, with the combined shortfall over the past two years being estimated at 155 million litres. This contributed to a 10 percent reduction in inventory as at 30 June 2024 and a corresponding decrease in the stock-to-sales ratio (SSR), which fell by 14 percent to 1.82. The SSR for white wine fell to below its 10-year average, while the SSR for reds remained 15 percent above its 10-year average despite falling by 23 percent over the past two years (see Figure 1).
Figure 1. Stock-to-sales ratio for Australian wine by colour over time. Source: Wine Australia.
Mr Bailey noted that the latest data shows stocks moving in the right direction, but only as a result of the small vintages, rather than growth in sales.
“The survey results indicate that stock-to-sales ratios have reduced, and production and sales are closely aligned. However, that is based on the current production levels, which are well below the long-term average,” he said.
“Any increase in production is likely to result in stock levels rising again, unless there is a corresponding increase in sales. This is a particular concern for reds, where the stock-to-sales ratio is still well above the long-term average.”
Global market conditions remain challenging
Mr Bailey noted that the global outlook for Australian wine remains challenging. World wine consumption has continued to decline over the past 12 months and is expected to decline further in the next five years, driven by economic constraints, overall alcohol moderation trends and competition for wine from other beverages.
“There are no easy solutions for increasing sales,” Mr Bailey said.
“Total global wine imports to China have fallen by two-thirds since 2017, so it is unlikely that we would return to our previous level of exports to that market.
“Meanwhile our wine sales to the rest of the world, including Australia, have been under pressure for the past several years as consumption has declined and competition has increased.
“We are unlikely to see a return to our previous average of 1.2 billion litres in the next few years.”
The Australian Wine Production, Sales and Inventory Report 2024 can be downloaded here.
Photo: Chateau Tanunda. Used for illustration purposes only.
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