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Wine export concerns despite record year

Business

Exports of premium Australian wine have reached a record value of $1.1 billion but the high could be short-lived as concerns emerge over the impact of coronavirus on China and declining North American sales.

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Figures released by Wine Australia this morning show the total value of Australian wine exports grow by 3 per cent to $2.91 billion in the 12 months to December 2019.

Exports of higher valued wines – those above $10 per litre free on board (FOB) – drove the growth in value despite a 12 per cent fall in total volume to 744 million litres.

Wine Australia chief executive officer Andreas Clark said the sector had focused on growing exports at higher price points and the results reflected the success of the sector’s strategy.

The total value of exports in 2019 was the second-highest for a calendar year and value is approaching levels from before the Global Financial Crisis.

The average value of exported wine increased by 18 per cent to $3.91 per litre FOB – the highest level since 2006.

“Australian wine companies have been very active in our export markets and the value of exports has now increased for six consecutive years,” Clark said.

“The volume of exports was down, with the decline heavily weighted towards lower price segments. The lower vintages in 2018 and 2019, together with lower inventory levels, meant that there was less wine available for export in 2019.”

Exports to China (including Hong Kong and Macau) in the 12 months to December 2019 increased by 12 per cent in value to $1.28 billion, while volume declined 17 per cent in volume to 142 million litres.

While the total value of wine imported by China has declined, Australia has consolidated its position as the number one imported country of origin ahead of France.

However, the impact of coronavirus in China and globally since the reporting period and lower than expected exports to the United States and Canada is already putting pressure on the 2020 figures.

The share price of Australia’s largest wine company, Treasury Wine Estates, has dropped by more than 25 per cent in the past 10 days following the coronavirus outbreak. The hit on the producer of iconic South Australian brands Penfolds, Wolf Blass and Wynns Coonawarra, was amplified last Wednesday when it announced to the Australian Securities Exchange that it had downgraded its earnings growth to 5 to 10 per cent for the 2020 financial year on the back of challenging conditions in the US wine market.

Today’s Wine Australia figures showed a 1 per cent decline in US sales for 2019 and a 13 per cent drop in Canada to $183 million.

Wine Australia spent $8 million last year on its largest-ever campaign in the United States, ‘Far From Ordinary’, in a bid to boost sales in the world’s biggest wine market.

Clark said the substantial momentum generated from the campaign had resulted in a 27 per cent increase in Australian sales through online retailer Wine.com in August and September and subsequent double-digit growth in October, November and December.

“This is a long-term play to grow the Australian presence in the world’s largest market and it will require ongoing investment as we continue to reshape the conversation in the USA with influencers, the trade and consumers,” he said.

“Looking ahead into 2020, we anticipate that coronavirus will have an impact on sales, particularly to China, but at this stage, it is difficult to predict the degree of that impact.

“Our first concern is people’s well-being in China and elsewhere and there will be time down the track to consider other impacts.”

Grape picking of early white and sparkling varieties for the 2020 vintage has begun in several key Australian regions of the Riverland and Barossa. However, yields are expected to be down in most regions following a challenging season of extreme heat, drought and bushfires.

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