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Australian wine exports experience double-digit decline

Exports of Australian wine fell 10% to $2.56 billion AUD from 2020 to 2021 according to the latest Export Report by Wine Australia. Much of this decline followed tariffs China levied on Australian wine last year.

Exports to mainland China fell 45% between 2020 and 2021 to hit $606 million for the fiscal year ending June 30. In volume terms, this reduction in consumption amounts to a 57% drop to 52 million liters sent to China over the course of the year.

However, this dip in demand from Australia’s largest export market opened the door for smaller markets to pick up some slack. In particular, exports to Hong Kong picked up significantly even as sales to mainland China dwindled. Shipments of Australian wine jumped 111% in the 12 months ended June 30, to $187 million AUD ($136.7 million), according to data from Australia’s wine body.

Despite this overnight growth in demand, it is still not enough to offset the damages done by the loss of business from mainland China. Nevertheless, there were other bright spots reported for Australian wine. The second-largest market behind China is the U.K., where exports hit a 10-year high at $472.0 million. Although shipments were up double digits for the year, the majority of that growth was seen at the end of 2020 when export volumes surged 40%. Over the last six months, that growth slowed to 8%.

Outside of the U.K., smaller markets also began buying more wine from Down Under. However, even accounting for the $240 million increase in exports to the U.K., Singapore, South Korea, Malaysia, Taiwan and Hong Kong, Australian wine businesses were not able to offset the losses to China, which has been a lingering problem for the last year.

Late last year, China levied crippling tariffs on Australian wine amounting to between 116% to 218% on Australian wine imports in containers of two liters. Initially, this caused demand to effectively dry up. In the last quarter of 2020, exports cratered 96%, and Australian winemakers shipped just 12 million Australian dollars ($9 million) of wines to China.

Hong Kong, however, may present a back door. Reports from experts cited in Bloomberg indicate that the rise in demand for Australian wine from this special administrative region of China, which has an independent tax system from the mainland, indicates that wine coming into Hong Kong is not staying in the city. Thanks to direct to consumer ordering and online retail, Australian wine is showing up on digital shopping spaces meaning that even with tariffs in place, the Australian wine that Chinese consumers have come to crave is not completely off-limits.

Nevertheless, while the report from Wine Australia is a mixed bag, the industry cannot ignore the damage sustained by Chinese tariffs, and there is no indication that this roadblock will be lifted anytime soon. As such, Australia has a steep hill to climb to make up for losses in other international markets that may not be as partial to the vintages that they produce.