UK boom, China bust drives bulk wine export surge

Exports of bulk Australian wine hit a document worth of $576.8 million within the 2020-21 monetary 12 months, up greater than 11 per cent on the earlier whereas bottled wine exports have been down by about 15 per cent.

It’s anticipated that bulk exports are once more going to underpin Australian wine exports when the 12 months to September 30 figures are launched by Wine Australia this month, that are prone to replicate an extra sharp decline in bottled exports to China.

Though bulk wine exports to China aren’t topic to authorities tariffs as they’re shipped in containers of larger than two litres, the coverage shift has not resulted in a rise in shipments.

In actual fact, bulk wine gross sales to China fell in 2020-21 to $34.1 million from $55.4 million in 2019-20.

The UK dominates Australia’s bulk wine export market, shopping for $304.9 million price of it in 2020-21, up 32 per cent on the earlier 12 months.

The European international locations of Germany, Denmark, Belgium, the Netherlands, France, Sweden and Finland additionally elevated their Australian bulk wine purchases in 2020-21.

This surge is anticipated to proceed as wine initially earmarked to be bottled and despatched to China turns into out there to bulk or industrial producers, placing downward strain on costs.

The main bulk wine gamers in South Australia are Hardys’ proprietor Accolade Wines, Kingston Estates and Austwine.

Interstate powerhouses embrace Casella, De Bortoli and Adelaide-headquartered Australian Classic Restricted, which produces most of its wine in New South Wales.

Many giant industrial producers established bottling operations or partnerships abroad within the late Nineteen Nineties and early 2000s to scale back transport prices and transfer packaging nearer to the place the wine is consumed.

Bulk wine is historically exported in 24,000-litre containers. The identical-sized transport container might solely transport as much as 10,000 litres of bottled wine.

The UK and US have at all times been the biggest abroad marketplace for bulk Australian wine, which is usually offered by means of main grocery store chains.

Nevertheless, growing costs of Australian wine lately brought on by sturdy demand from China has till just lately resulted in a discount in bulk wine export volumes, notably to the price-sensitive UK market.

Whereas the dramatic latest demand and provide shift for bottled wine exports is dangerous information for a lot of grape growers and small and medium-sized premium producers, it may very well be additional excellent news for industrial exporters of bulk wine.

Stepney-based Austwine is a prime 10 exporter of Australian wine and sends about 50 million litres of bulk wine annually primarily to North America and western Europe.

CEO Jim Moularadellis stated the timing of Brexit, a free commerce settlement with the UK and the affect of COVID-19 on wine shopping for patterns had all been elements in Britain.

“Costs are down due to the coverage change in China so unexpectedly Australian wine has grow to be far more aggressive and I feel there can be continued ranges of fine development of Australian wine within the UK due to decrease costs,” he stated.

“As a result of the character of the market has a bias in direction of cargo in giant containers, the general market has grown due to Brexit and the free commerce settlement and due to this fact bulk wine has grown.

“In the course of the pandemic, something that was offered by means of supermarkets received a free kick however something offered by means of eating places, resorts and catering companies fell flat and sometimes these are the costlier wines which are sometimes packaged nearer to the purpose of manufacturing slightly than the purpose of consumption.”

A Wine Australia snapshot of Australia’s bulk wine exports within the 12 months to June 2021.

By quantity, bulk wine accounted for 60 per cent of Australia’s exports in 2020-21, considerably up on the long-term common of about 55 per cent.

This was on the again of a 5 per cent enhance in quantity to 416.6 million litres and a 6 per cent enhance in value to an all-time excessive of $1.38 per litre.

However business leaders count on Wine Australia’s 12-month rolling export information to point out a discount within the per litre value within the coming months as the complete affect of the Chinese language tariffs kick in.

A brand new consultant physique referred to as Australian Business Wine Producers (ACWP) shaped in August to cowl Australia’s three largest wine-producing areas – South Australia’s Riverland, Victoria’s Sunraysia and NSW’s Riverina.

The physique is headed by former Riverland Wine chief Chris Byrne and goals to provide producers within the three inland areas – which produce about 70 per cent of Australia’s wine – a united voice on how their huge mixed business levies are spent.

Moularadellis described the division between the industrial and premium sides of the Australian wine business as “a case of the few and the numerous”.

“The few are paying the payments and the numerous have the voices in order that new organisation is simply making an attempt to be extra of a voice to the few that find yourself paying many of the payments, by way of the analysis that’s achieved and the levies which are collected.”

Byrne stated the industrial sector and its bulk wine shipments had been the spine of Australian wine exports because the Nineteen Nineties

He stated the sturdy view of the ACWP membership was that it was time the industrial facet of the sector asserted its relevance by way of its worth to the Australian wine business.

“We wish to progressively and respectfully have somewhat bit extra affect over advertising and marketing packages and analysis and growth packages to focus on the very fact there are nice alternatives throughout the inland due to the dimensions that we have already got to actually make nice progress by way of winery know-how to scale back the price of manufacturing, enhance our competitiveness and likewise enhance our environmental credentials,” he stated.

Byrne stated the Chinese language tariff scenario had been difficult by very difficult transport points brought on by a scarcity of containers and ships out there to hold Australian wine abroad.

“So we’re seeing very important delays and really steep will increase in the price of transport due to the tightening of that container and transport market,” he stated.

“We’re additionally going to see a major overhang of crimson wine within the coming 12 months – abroad markets are properly and actually conscious of that.

“The demand will stay however whether or not or not we will fulfill the demand due to the transport is problematic and I feel due to the overhang then inevitably the availability/demand circumstance goes to place important downward strain on value per litre of all Australian wine.”

One other complicating issue is the document 2021 classic.

In a traditional 12 months, the high-quality bumper harvest of two.03 million tonnes in Australia could be celebrated as a boon for the business, particularly because it adopted two drought and bushfire affected vintages that depleted Australia’s wine inventories to their lowest ranges since 2011.

Nevertheless, this 12 months’s document crop will replenish these shares and extra, prompting wine firms to already reassess their grape contracts for 2022.

Byrne stated this meant many producers that had made crimson wine initially grown for export to China was starting to bolster bulk wine shares.

“The wine remains to be there in tanks and it’s received to be cleared in any other case we received’t have room to soak up subsequent 12 months’s classic and that mainly means making it out there on the majority market and promoting it at a fee per litre slightly than an quantity per case,” he stated.

“In the event you speak to the majority wine merchants you’ll discover that a whole lot of it’s already making its manner into the stock listings that bulk wine merchants have.

“The continued impact of China will proceed to be very important till extra of the premium product can obtain the type of ranges of diversification which are essential to unfold their merchandise extra evenly in export markets.”