Aussie-China wine exports: Zero to hero in two decades

By Richard Whitehead

- Last updated on GMT

Pic:getty/gustofrazao
Pic:getty/gustofrazao

Related tags: Wine, Australia, China

Opportunities in the Chinese wine market remain “exciting and plentiful” with consumption forecast to continue to grow at 6% per annum for the next five years, according to Wine Australia. At this pace the country will break the 3tr litre barrier by 2022.

As China continues on course to surpass America as the world’s biggest wine consumer, Australian producers are increasingly cashing in, as exports there continue to experience strong growth in both value and volume.

Indeed, Wine Australia, the statutory body that represents the industry, referred to its export value growth to Northeast Asia—the marketing region dominated by China— as having been the “standout​” performer over the last year.

Growing at 29% over the 12 months to the end of September, sales of Australian wine to mainland China of A$949m (US$867m) were greater than all other export regions combined, except for North America—the only one to show any decline over the period.

The continuing growth and development of Australian wine [in China] is robust​,” Wine Australia said in its assessment of the country’s performance.

Premium performance

What’s more, there has been growth in every price segment of wine exports to China over the last year, with notable performances from the A$20-29.99 and A$50-59.99 segments, showing 73% and 47% growth respectively.

According to Peter Bailey, general manager of market insights at Wine Australia, the country is a value powerhouse.

China has the highest average value per litre of the top 11 export destinations by volume, indicating a large amount of premium wine being shipped to this market​,” he told BeverageDaily.

It is now Australian wine’s number one export market by value, having grown from having less than a 10% share of exports as little as eight years ago to now accounting for 39% by value and 21% by volume, also making it Australia’s second biggest export market in this regard, Bailey said.

Moreover, since 2000 Australia’s wine exports to mainland China have experienced remarkable growth from only A$14m to just under $1bn, with value more than doubling since the FTA’s commencement in 2015.

Pleasingly, we have seen continued strong growth in Australia’s wine exports to China and through the China-Australia Free Trade Agreement there has been added motivation through the gradual reduction of wine tariffs, providing Australian wine exporters with a competitive advantage over key producers such as France, Italy and Spain,​” Bailey added.

Changing perceptions

Chinese perceptions of Australian wines has seen a marked improvement over the past eight years, particularly in terms of quality and value for money.

Every year since 2010, industry analyst Wine Intelligence has conducted a brand health check, commissioned by Wine Australia, to measure how consumers perceive Australian wine compared with other wine nations.

The March 2018 survey, which gauged the views of wine drinkers in 10 markets, found that Chinese consumers gave Australian wine an overall quality score a 7.69 out of 10 in 2010. This figure had increased significantly to 8.32 by 2018, it found.

Moreover, mainland Chinese consumers were most proud to serve Australian wine after Australians themselves—tipped by a margin of just 3%.

Surprisingly Chinese drinkers associated Australian imports with “expensive and fine wines​”, beating most other countries by a landslide—77% compared to a survey average of 53%. They were also happiest to recommend Australian wines to others—after Australia, of course.

The Australian wine community’s long relationship with China’s wine trade may have helped form these perceptions, suggests Bailey.

Some people think Australia has enjoyed overnight success in China, and clearly we’ve enjoyed strong growth, but all the exporters who are experiencing strong returns there have been in China for the long term, for 10-15 years building all those relationships that need to be nurture and cultivated in that market to enjoy commercial outcomes​,” he said.

Our official records show Australian wine being shipped to Shanghai back to 1936, but it is only really since the commencement of the FTA that we’ve seen an acceleration in demand for Australian wine in China​.”

Australia’s wine businesses also frequently travel to China to build relationships with importers and consumers. They are enthusiastic about the opportunities in the market and in ensuring long-term relationships are established, Bailey added.

As one of two key markets identified to receive a dedicated marketing push through the Australian Government’s A$50m Export and Regional Wine Support Package—the other being America—Wine Australia has stepped up its engagement with China in a range of events that showcase Australian wine.

These include Vinexpo Hong Kong, where Australia was the Country of Honour in 2018, as well as the China Roadshow, the Wine Australia China Awards, Hong Kong Wine and Dine Festival and ProWine China.

Export opportunities

So with consumer appreciation for an Australian drop, a dedicated marketing effort, a thriving FTA in place and relationships solidifying with a close trading partner, what does the future have in store for exporters?

A surging Chinese middle-class is expected to have added 350m people over the period between 2015 and 2022, and should push consumption of goods and services to triple current levels, to US$14tr by 2030, according to Efic, Australia’s export credit agency.

This middle class is willing to pay a premium for quality, safe and reliable products, meaning that wine consumption is growing as people start to buy grape-based wine​,” Wine Australia’s report said.

The strength in depth— solid growth at almost every price point—is one of the more encouraging signals, especially with almost a third of the total export value coming from wines above A$20 per litre​,” it added.

With China’s fast-growing wealth and its taste for increasingly expensive tipples, Aussie winemakers are bound to toast its market’s exciting and plentiful opportunities for some time to come.

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