Australian wine exports increased by 1 per cent in volume to 623 million litres and declined by 4 per cent in value to $1.94 billion in the year ended 31 December 2022, according to Wine Australia’s latest Export Report released today.
The rise in volume relative to value was driven by growth in the shipments of unpackaged wine, particularly to the United States of America (US) and Canada, as global shipping challenges improve.
Diversification and intensification efforts of Australian wine exporters were also evident in the report, with exporters shipping wine to 120 destinations during the period, up from 112 the previous year and the highest since the start of the COVID-19 pandemic. Growth in the value of exports to Southeast Asia continued through the period with a 16 per cent rise in value to $305 million.
Notwithstanding, it was another tough year for Australian wine exporters, with rising inflation, business costs and interest rates impacting margins, and it is anticipated this will continue in 2023.
Wine Australia Manager, Market Insights Peter Bailey said the increase in unpackaged wine exports is an indication of improvements to the significant shipping challenges in some markets, which have been a factor since 2021.
“It was pleasing to see positive signs of improvements emerging in shipping conditions in some markets, noting delays are still being reported along certain trade routes,” Mr. Bailey said.
“Shipments of 2021 and 2022 vintage wines had been largely delayed due to the shipping challenges, particularly unpackaged shipments. As these conditions eased in the latter half of 2022 in some regions, Australian wine producers were finally able to ship their products to customers overseas. This increase in the share of unpackaged wine shipments contributed to the decline in the total value of exports, as unpackaged wine is shipped at a lower average free-on-board value because packaging costs are excluded.
“Increases in the value of exports to Thailand, Malaysia, and Canada offset declines in value to Singapore, Hong Kong, and the US. However, decreased shipments to the United Kingdom (UK) in the second half of 2022, were greater than the increase in overall value to other markets. This drop was anticipated, as Australia experienced two years of elevated shipments as a result of Brexit deadlines and increased demand for wine in the off-trade (supermarkets and bottle shops) during the COVID-19 pandemic when many on-trade businesses were closed.”
The decline in the overall value of exports was driven by shipments valued below $5 per litre free-on-board (FOB), which declined by 9 per cent to $988 million. Exports in this segment declined in value in a number of markets – including the UK, US, Denmark, Germany, the Netherlands, and New Zealand.
Meanwhile, exports above $5 per litre increased by 2 per cent in value to $957 million. The markets driving this trend were Thailand, Malaysia, Canada, Denmark, and Japan. Growth to these markets has been partially offset by a decline in exports in this price segment to Singapore, Hong Kong, and the UK.
“Contributing most to the growth above $5 per litre were exports valued above $10 per litre, which grew by 3 per cent in value to $623 million. This price segment increased its share of packaged exports in many destinations, which aligns with premiumisation trends in mature markets of wine consumers drinking less, but higher priced, wine,” Mr Bailey said.
The top five markets by value were:
- US (down 3 per cent to $390 million. 20 per cent value share of total export value)
- UK (down 18 per cent to $373 million. 19 per cent share of total export value)
- Canada (up 14 per cent to $188 million. 10 per cent share of total export value)
- Hong Kong (down 13 per cent to $167 million. 9 per cent share of total export value), and
- Singapore (down 20 per cent to $132 million. 7 per cent share of total export value).
The top five markets by volume were:
- UK (down 11 per cent to 216 million litres. 35 per cent share of total export volume)
- US (up 13 per cent to 140 million litres. 23 per cent share of total export volume)
- Canada (up 46 per cent to 68 million litres. 11 per cent share of total export volume)
- Germany (down 15 per cent to 29 million litres. 5 per cent share of total export volume), and
- New Zealand (down 6 per cent to 29 million litres. 5 per cent share of total export volume).
Figure 1: Export value growth/decline by region
In 2022, Australian wine exports to North America increased by 2 per cent to $580 million.
Exports to the US declined by 3 per cent in value to $390 million and increased in volume by 13 per cent to 140 million litres. As volume growth outpaced value, the average value dropped by 14 per cent to $2.78 per litre. The number of exporters to the US grew by 5 per cent to 303, the highest since 2008.
Exports to Canada increased by 14 per cent in value to $188 million and 46 per cent in volume to 68 million litres. The average value of exports declined by 22 per cent to $2.76 per litre FOB.
Driving the growth for both markets was the rise in unpackaged wine shipments, increasing in volume by 67 per cent to 76 million litres in the US and up by 81 per cent to 44 million litres in Canada. Packaged exports on the premium end of the price spectrum also grew in both markets. Exports to Canada valued at $5 per litre and above grew by 13 per cent to $114 million, while exports to the US above $10 per litre grew by 4 per cent to $50 million.
Australian wine exports to Europe declined by 16 per cent to $586 million.
Since Brexit was announced in 2016, exports to the UK have been unpredictable and there have been several peaks and troughs during this time. In the latest figures, Australian wine exports to the UK declined in value by 18 per cent to $373 million and in volume by 11 per cent to 216 million litres. The average value of exports also declined, by 8 per cent to $1.72 per litre FOB.
Australian wine holds the number one position in the UK off-trade – a category that benefitted from the closure of the on-trade during the COVID-19 pandemic, and 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. However, as the off-trade sales volume of wine has declined, Australia has seen a smaller reduction than the total market, declining by 4 per cent in volume in the year ended December 2022, while the total off-trade wine market declined by 8 per cent (IRI Worldwide).
European markets are experiencing tough operating conditions. Nearly every European destination declined during 2022, with the largest contributor to the decrease, besides the UK, being Germany (down 22 per cent in value to $38 million), followed by the Netherlands (down 19 per cent to $29 million) and Denmark (down 13 per cent to $37 million).
Exports to Southeast Asia increased by 16 per cent in value to $305 million. Exports to all key Southeast Asian destinations increased, with the exception of Singapore. The main drivers behind this growth were Thailand (up 118 per cent to $62 million) and Malaysia (up 78 per cent to $61 million). A decline in the value of exports to Singapore, down 20 per cent to $132 million, offset some of these gains. Singapore remains the number one destination in Southeast Asia for Australian wine exports but is a trading hub and some of the wine is on-shipped to other Asian markets. As with all trading hubs globally, export levels can vary to these markets depending on changes in business practices of shipping directly to the selling destination or vice versa.
Exports to Northeast Asia declined by 10 per cent in value to $314 million and 15 per cent in volume to 32 million litres. The results in this region were mixed – with markets such as Hong Kong and mainland China continuing their decline. Growth in exports to Japan offset some of this loss, up by 8 per cent to $51 million and driven by exports above $10 per litre, which reached a calendar year record of $13 million. The number of exporters to Japan grew by 23 per cent to 260 in 2022, up from 211 in 2021. While exports to South Korea declined overall, the above $10 segment showed strong growth, up 28 per cent to $26 million.