Record value and volume – A$3 billion milestone reached in the year ended July 2007, value grew 8% to reach a milestone A$3 billion and volume grew 10% to 805 million litres. The average price declined 2% to A$3.73 per litre. Both the value and volume outcomes represented new records for Australian wine exports. The modest decline in the average price was a result of the average bottled price increasing 6 cents to A$4.86 per litre (up 1.3%) while the bulk average price declined 10 cents to A$1.02 per litre (down 9%).
History shows that July is the milestone month for wine export values!
July appears to be a milestone month for Australian wine exports with each of the past three billion-dollar milestones all being reached in the same month. The first A$ billion in exports was reached in the year ended July 1999 and exactly three years later (July 2002), the A$2 billion mark was passed. Reflecting a period of declining prices after A$2 billion was reached, it then took a further five years to reach A$3 billion in July 2007. At the same time as exports passed A$3 billion for the first time in this reporting period, volumes also passed a milestone 800 million litres, also for the first time.
North America more prominent as the A$ billion milestones reached
Over the past eight years over which the three A$ billion milestones have been reached, Australia’s top 5 markets for the value of sales have remained unchanged, with the UK leading the way. Nevertheless, the weight of the value shipped has shifted significantly to North America with the value of shipments to the US currently challenging the UK for the number one spot.
At the first milestone of A$1 billion, Australia’s top 5 destinations were the UK, US, New Zealand, Canada and Germany. The UK dominated this profile with the US, in second position, accounting for less than a half the value of shipments to the UK. The value of shipments to Canada, in fourth position, were only 11% of those to the UK.
At the A$2 billion mark, the value of sales to the US had grown faster than those to the UK, with the US value representing just over two thirds of the UK value. The value of shipments to Canada had surpassed New Zealand’s meaning Canada assumed third position.
At the A$3 billion mark, the ranking remained the same but the pace of growth to both the US and Canada continued to outpace the UK with the result that Canada’s value had risen to represent 28% that of the UK and the US fell just one percentage point short of the UK – at A$962 million compared to the UK’s A$973 million.
Overseas consumers ‘trading up’
Overseas consumers of Australian wine appear to have traded up in the year ended July 2007. Growth in the highervalued-valued shipments (over $5 per litre [fob]), up 25% or 39 million litres outpaced those in the sub-$5 per litre bracket (up 5% or 31 million litres). The volume share of the over-A$5 per litre bracket increased 3 percentage points to 24%.
Growth in bottled wine as growth in bulk abates
In a turnaround from the previous 12 months when bottled shipments failed to grow, and were in fact negative, bottled shipments in the year ended July 2007 grew 6% to reach 563 million litres (up 34 million litres on the year before).
The main driver of this growth was red bottled wine which grew 30 million litres while white bottled wine grew just 1.7 million litres. Increased demand for red bottled wine also led to a 10 cent increase in the average litre price to A$5.15 compared to a 3 cent fall in white bottled wine to $4.25.
Bulk wine shipments in the year ended July 2007 grew 20% to reach 228 million litres. This growth rate is well down on the previous 12 month period, of 50% growth. Despite the abated growth of bulk wine shipments, growth nevertheless saw the average price per litre of bulk wine decrease 9% to A$1.02. This compares to a 13% decrease in the previous year.
UK, US, Canada and China are key markets in the period
Bulk wine shipments to the UK held up in the year ended July 2007. The UK remains the leading destination for Australian wine with volume growing 6% to reach a record 285 million litres. Value grew 2% to reach 974 million litres meaning the average price per litre decreased 4% to A$3.42 on the back of continued growth in bulk shipments to this destination.
The US made by far the biggest contribution to value growth in the period at 30% of the overall growth. Volume shipments to the US grew 5% to reach 222 million litres. Value grew at a faster rate than volume, growing 7% to reach A$962 million. Recovery in the growth of bottled shipments and a significant abatement in bulk shipments led to a 2% increase in average per litre price to A$4.33.
The driver of growth in shipments to Canada swung back strongly to bottled product. The volume shipped to Canada grew just 1% to reach 51 million litres while value grew at 11% to reach a new record of A$273 million. Driving this value growth was a 51 cent increase in the average per litre price to A$5.39 on the back a 10% growth in bottled shipments and 31% decline in bulk wine shipments.
The growth in bottled shipments to China outpaced bulk shipments compared to last year when the opposite was strongly evident. Positive growth to China continued as value grew 125% to reach A$51 million while volume grew at 54% to 22 million litres. A significant factor in the 46% growth in average price per litre to A$2.31 was the 174% growth (4.7 million litres) in bottled wine against the 23% growth (2.6 million litres) in bulk wine shipments. Bottled wine shipments in the year ended July 2007 represented 34% of the volume – up from a 19% share last year.
Introduction to the full Report. Authors:
Lawrie Stanford – Manager Information and Analysis, AWBC
Rodney Cargin – Analyst, AWBC
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