A bucket of grapes is thrown into a sorting tray.

Australian export wine markets emerge in wake of China tariff increase

Wine exports to mainland China are scraping the bottom of the barrel, with only six million liters exported in the past financial year, worth $24.6 million.

It was a huge plunge from the end of the financial year in 2020, when exports to mainland China amounted to 120.7 million liters and were valued at $1.1 billion over the 12-month period to June 30.

That was before China imposed import tariffs of about 220 per cent on bottled Australian wine imports later that year.

Overall it has been a tough financial year for Australia’s wine producers with exports down 10 per cent in volume to 625 million liters and down 19 per cent in value to $2.08 billion in the year ending June 30.

Wine Australia market insights manager Peter Bailey said the Chinese results were expected but there were hopeful signs in other markets.

“If you look at exports outside of China we actually saw an increase, so in the last 12 months if you exclude China from those figures exports increased by five per cent in value to $2.06 billion.”

The United States was the top export destination in terms of value, recording a nine per cent increase to $436 million in the most recent financial year.

Wine Australia’s export results show how far the Chinese exports have failed.(Supplied: Wine Australia)

It had proved a tough market in which to get traction but Mr Bailey said sustained effort appeared to be paying off.

“It’s been a slow burn the US but we’re seeing some strong growth in value, particularly above $10 per liter even though there was growth in almost all price segments,” he said.

“That really strong growth at $10 a liter was up 57 per cent to $61 million and that’s at the highest level since 2009.”

He said stronger growth in premium wine exports was consistent with market trends in the US which had been growing at a much faster rate than the commercial value segment, which had been in decline.

But the gains were offset by a drop in the United Kingdom, a market that had been the largest by volume and value in the past year.

A graphic with a world map shows where wine is being exported
The Wine Australia export report shows growth in other markets.(Supplied: Wine Australia)

That market dropped 10 per cent in value to $421 million but was still the largest market by volume, despite a 15 per cent decline to 227 million litres.

“The decline comes after exports increased to their highest level for a decade in 2021 and that really came as a result of a surge in wine sales in the off-trade [retail, off-premises consumption] where Australia has its highest market share,” Mr Bailey said.

“That was due to the COVID-19 related shut down of the on-trade, but on top of that we also had exporters sending in wine ahead of Brexit so in 2021/22 we saw the market return to a more normal situation hence the decline in volume and value.”

Growers struggling to adjust

The largest producing wine region in Australia, the Riverland, has not been immune to export losses.

Salena Estate Wines owner Bob Franchitto said he was concerned about more than just the tariffs into China.

The Wine Australia report highlighted growth in Singapore, United States, Malaysia, Thailand, India and New Zealand.

“Every market is worthwhile pursuing but these markets aren’t going to replace what has happened with China,” Mr Franchitto said.

He said COVID had a bigger impact than China’s tariffs.

“We’re looking at other markets and we’ve started supplying a little bit into the US, and we’ve got an order into Japan and Malaysia is looking like there’s an opportunity for us,” he said.

“But they’re not going to overnight take up the slack that was lost between COVID and China.”

Mr Franchitto said it would probably take three or four years for the wine industry to recover.

A man stands in a vineyard smiling at the camera.
Bob Franchitto says wine exports have been a struggle this year.(Supplied: Salena Estate)

Mr Franchitto said continued freight delays were causing more pain for wine makers.

“Right now trying to ship wine is becoming quite difficult,” he said.

“You know you get orders, you get a booking, you’re ready to ship and all the sudden your containers are cancelled, your ship’s canceled … it’s delayed so everything seems to be taking a lot longer.”

Australian Grape and Wine chief executive Tony Battaglene said Australia’s wine industry would be in for more pain in the coming years with oversupply issues.

“We’ve got full tanks … and we can’t get wine offshore because freight logistics are really tricky so I think we’re going into a situation next year where it’s going to be really hard for growers,” Mr Battaglene said.

He said it was the most difficult time he had seen during his 24 years in the industry.

“I think it’s a cycle that’s contracted and I think it’s going to take a long time to get up because those COVID generated issues around freight, inflation, labor shortages — there’s no quick solution to these problems,” he said.

Despite some positive signs in some of the markets, Mr Battaglene said they couldn’t get as big as the Chinese market.

“Markets are coming on really well, we’re making good progress particularly in South Korea as well as Hong Kong, Singapore and Thailand,” he said.

“India is a long burn, it’ll take time.”

He said the industry had some good wins in the recent free trade agreement announcement.

“But realistically it will be some time before we see progress in that market.”

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