Australian wines losing their global appeal

More bad news for the Australian wine industry today with news that exports declined by 2% in value to $1.90 billion and 3% in volume to 607 million litres in the 12 months to December 2023.

The Wine Australia Export Report released today said that although these figures are an improvement on than those reported in the September 2023 Export Report, the results are still well below long-term averages.

Particularly disturbing will be major falls in sales in the US, a declining market for Australian wines.

Wine Australia manager for market insights, Peter Bailey said that Europe and North America drove the reduction in Australia’s export value over the year, declining by 7% and 12% respectively.

“In Europe, exports to the top 15 markets declined in value as the region suffers through higher inflation rates than North America and Asia, as well as supply chain issues," he said.

"This includes the United Kingdom, Australia’s largest export market by volume. Pleasingly, Australia’s exports to the UK grew in volume for the first time since mid-2021.

“Both the United States and Canada contributed to North America’s decline in value. In 2023, packaged shipments to these markets continued their decline and unpackaged shipments, which were growing strongly, have started to ease off.

“The decline in exports to Europe and North America has resulted in their share of export value dropping to 29 and 27% respectively. Meanwhile, Asia’s share of export value has grown to 37%.

“Hong Kong and Singapore were stand out destinations for Australian wine in Asia, driving the growth of value to the region. Further, the number of exporters to Hong Kong also grew – up 138 export businesses to a total of 531 in 2023. Hong Kong and Singapore are key trading hubs in the Asian region and, as such, some of the wine is on-shipped to other markets.”

The decline in Australia’s exports comes at a time when most wine producing countries are reporting decreasing sales, Wine Australia says.

The global alcohol market is softening and impacting the entire wine category, especially in mature markets. This trend has been attributed to a combination of global economic tightening resulting in less discretionary spending and consumers being more conscious of their health.

Is the wine industry in trouble in the US?

Declining wine sales in the US loom as a major problem for the industry in 2024, a new report says. 

The annual Silicon Valley Bank’s wine industry report reveals “near 0% value growth” and warns that “flash sales” and “increased discounts” will become more commonplace in the US, industry authority The Drinks Business reports.

Wine sales in the US are predicted to continue their slow decline during 2024, although tasting room visits and direct-to-customer sales are expected to slightly increase during the year, as will premium wine sales, according to the 23rd annual wine report issued by the bank this week. 

Preliminary 2023 year-end estimates show a decline in wine volume sales of 2%-4%, and final value sales figures for 2023 are expected to “hover near 0% growth,” the report says, although adding, “Total premium wine sales by value will improve in 2024.”

A further issue for US producers is that exports are relatively minimal with global markets not keen on wines made with sweetness and lashings of new oak. 

A continuing healthy American economy is key to predictions, says the report’s author, Robb McMillan, who predicts that “the US economy is  unlikely to enter a recession in 2024.

“Wholesalers are full up, as far as they can go,” McMillan says, which is making them “more picky” in what they buy from wine producers. 

Wholesalers “are more afraid of being stuck with inventory that they may have to discount,” McMillan says, than they are with inflation and “the costs of carrying inventory.”

One concern the report cited was continued over-production in two of the three major wine states - California and Washington - even though sales have declined for three years. Oregon production was assessed to be “in balance with demand”. 

Image: Filoteo Ventiuro, Scop.io