Australian wine exports resilient to Chinese tariffs

Wine Australia’s latest Export Report released today reported in the 12 months to December 2020 the decline in exports to China had been offset by significant growth in exports to Europe, up 22 per cent to $704 million – the highest value in a decade, North America, up 4 per cent to $628 million and Oceania, up 11 per cent to $115 million.

These positive figures show the Australian wine industry is resilient in the short term to tariffs on Australian wine exports to China imposed on 28 November 2020 by The Chinese Ministry of Commerce (MOFCOM).

The Report revealed exports reached record year-on-year value of $3.1 billion in the 12 months ended October 2020 due to exports to mainland China and the United Kingdom before a steep decline for the final two months of 2020 predominantly in exports to China as a result of tariffs. In the 12 months to December wine exports decreased by 1 per cent in value to $2.89 billion in the 12 months to December 2020.

There was an increase in volume of 0.5 per cent to 747 million litres and a 1 per cent decline in average price to $3.87 per litre free on board (FOB).

Chief Executive Officer Andreas Clark said exports to mainland China were immediately down following the imposition of the temporary tariffs in November. The sharp decline in export volumes and value in the final two months of the year saw the overall value for 2020 decline by 14 per cent to $1.01 billion and volume drop by 29 per cent to 96 million litres (10.7 million 9-litre case equivalents).

Australian wine exports saving grace came with the UK and the US markets.

Australian wine exports effectively leveraged the strong growth in the UK that commenced with the advent of the pandemic leading to increased demand that continued to in the months leading to Brexit.

Exports in the 12 months ended December 2020 to the UK increased by 29 per cent in value to $456 million and 19 per cent in volume to 266 million litres (29.6 million cases), extending the UK’s lead as the biggest destination for Australian wine exports by volume. The average price received for Australian wine in the UK increased by 9 per cent to $1.71 per litre FOB, the highest level since September 2011

While in the USA after declining for the three previous calendar years and despite widespread pandemic challenges and political turmoil, the value of exports increased by 4 per cent to $434 million. The average value increased by 5 per cent to $3.21 per litre FOB, the highest level since 2009.

‘Wine businesses are resilient and are already adapting to these changed market conditions, increasing their engagement in markets other than China, particularly the UK, USA, Canada and the domestic market’, said Mr Clark.

Mr Clark said that there was a decline in value across most price points with the notable exception of exports under $2.50 per litre FOB, which grew by 17 per cent, driven by increased shipments to the UK, New Zealand, Scandinavia, Germany and Canada.

In the year to December 2020, the value of wine exported in glass bottles (the subject of temporary tariffs imposed by China in November 2020) decreased by 5 per cent to $2.3 billion while volume decreased by 9 per cent to 311 million litres (35 million 9-litre case equivalents).

Unpackaged wine exports increased by 20 per cent in value to $585 million and increased 9 per cent in volume to 428 million litres (48 million 9-litre case equivalents). The average price of unpackaged wine increased by 10 per cent to $1.37 per litre FOB.

The top 5 markets by value were: