Finance Finance News International demand for Australia’s fine wine continues to grow

International demand for Australia’s fine wine continues to grow

Australian wines are increasingly being featured in international markets. Photo: AAP
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The world can barely get enough of Australian wine, with 94 million cases of Aussie wine sold around the world in 2018.

That is an increase of 5 per cent in volume, but consumers are paying more for it with the value of exports up 10 per cent to $2.8 billion.

Red wine, in particular, has continued its red-hot growth, now making up 76 per cent of Australia’s wine exports.

Wine Australia’s chief executive officer Andreas Clarke said there was increased understanding and awareness around the premium Australian wine product that was going to all major markets around the world.

“We’re seeing that in the $10 FOB (free on board) per litre and above category, which is achieving record volume and value, that segment has now overtaken what has historically been the highest segment, which was around $2.50 to $5 per litre,” Mr Clarke said

“So it’s a really strong premium story that is getting traction in our major markets and it’s where we need to play in the longer term.

China has been the engine room for much of the growth in Australian wine’s value in recent years.

“We’re in a really strong position in China, in terms of the continuing trade’s appreciation for what Australian wine has to offer across all our price points, so we have a really solid platform of what we’re taking to market there,” Mr Clarke said.

There has been growth in most major markets including the United Kingdom, Japan, Canada, New Zealand, and Singapore, but the United States continued to decline slightly.

The value of Australian wine exports increased by 10 per cent. Graphic: Wine Australia

“We’re starting to see some signs of recovery [in the US]. We all get a little bit impatient and would like it to move a bit quicker. But the last quarter in the US, we were up 1 per cent. Still, on a yearly basis, the overall decline was 5 per cent but that last quarter gives some cause for future optimism.”

However, despite a price increase for premium wines on export markets, Bob Franchitto, managing director of Salena Estate in Loxton, said they had not seen a huge increase in value for their wines on export markets.

“The prices have gone up a little bit, but I don’t think we’ve gone up 10 per cent,” Mr Franchitto said.

“A little bit of that depends on what happens with the world market as well, so it’s a combination of everything.

“At the moment, Australia is doing very well in China and Asia but other markets have been a bit short on supply in the last couple of years … after the 2018 vintage they had a bigger crop, and things might be coming into balance a bit … it might put a bit more pressure now on prices not being able to increase too much.”

Mr Franchitto said their major focus was now set on exporting their organic wines to China, North America, and Europe.

However, he said he was concerned about the recent wine grape price release to the industry in the Riverland for the upcoming 2019 vintage.

“We are probably seeing an increase of 20 to 25 per cent on last year … it’s perhaps a bigger increase than what the market can absorb long term, or the Australian industry can absorb in a medium, long-term future … it’s a pretty big jump all of a sudden,” he said.

Wine continues to flow into the United Kingdom

Managing director for Salena Estate, Bob Franchitto, is concerned about wine grape prices. Photo: Salena Estate

Australia’s largest wine market by volume is the United Kingdom, which is why exporters were keen to see trade continue without interruption when the UK leaves the EU.

The government has been able to ensure the existing trade arrangements with the European Union will continue for the UK as well.

“So it gives our exporters a lot of comfort and certainty that their product can still be exported to the UK and they won’t face any issues in terms of labelling and any other requirements,” Mr Clarke said.

Mr Franchitto said the UK was a very important market and he was glad the trade issues had been sorted.

“In the overall scheme of things, I don’t see Brexit as too much of an issue. There will be some ups and downs, some wins and losses for different countries and even for Australia, but in the end it will settle down,” Mr Franchitto said.

“It doesn’t mean that they are going to stop buying champagne from France and they will still keep buying wine from Australia.

“I think every market worldwide that we sell to is important to us, whether it is now or in the future, because today’s very small markets will be tomorrow’s big markets, and we need every market that we have.”