Monday, February 4, 2019

Australia's wine exports grow, organic leader eyes China, North America and Europe

Bob Franchitto
 Bob Franchitto, Managing director for Salena Estate, Bob Franchitto,
 is concerned about wine grape prices for the upcoming 2019 vintage.

Source: ABC

Editor's Note: Australia's largest organic producer Salena Estate Wines, which makes 150,000 cases of organically grown wines annually, is focusing on exports to China, North America and Europe

The world can barely get enough of Australian wine with 94 million cases of Aussie wine sold around the world last year.

That is an increase of 5 per cent in volume, but consumers are paying more for it with the value of exports up 10 per cent to $2.8 billion.

Red wine, in particular, has continued its red-hot growth now making up 76 per cent of Australia's wine exports.

Wine Australia's chief executive officer, Andreas Clark, said there was increased understanding and awareness around the premium Australian wine product that was going to all major markets around the world.

"We're seeing that in the $10 FOB (free on board) per litre and above category, which is achieving record volume and value, that segment has now overtaken what has historically been the highest segment, which was around $2.50 to $5 per litre," Mr Clark said

"So it's a really strong premium story that is getting traction in our major markets and it's where we need to play in the longer term.

"An interesting figure, which always brings it into a bit of perspective, is that 22 million glasses of Australian wine is consumed by our global customers every day."

China has been the engine room for much of the growth in Australian wine's value in recent years.

"We're in a really strong position in China, in terms of the continuing trade's appreciation for what Australian wine has to offer across all our price points, so we have a really solid platform of what we're taking to market there," Mr Clark said.

There has been growth in most major markets including the United Kingdom, Japan, Canada, New Zealand, and Singapore, but the United States continued to decline slightly.

The value of Australian wine exports increased by 10 per cent.

"We're starting to see some signs of recovery [in the US], we all get a little bit impatient and would like it to move a bit quicker. But the last quarter in the US we were up 1 per cent. Still, on a yearly basis, the overall decline was 5 per cent but that last quarter gives some cause for future optimism."

However, despite a price increase for premium wines on export markets, Bob Franchitto, managing director of Salena Estate in Loxton, said they had not seen a huge increase in value for their wines on export markets.

"The prices have gone up a little bit but I don't think we've gone up 10 per cent," Mr Franchitto said.

"A little bit of that depends on what happens with the world market as well, so it's a combination of everything.

"At the moment, Australia is doing very well in China and Asia but other markets have been a bit short on supply in the last couple of years … after the 2018 vintage they had a bigger crop, and things might be coming into balance a bit … it might put a bit more pressure now on prices not being able to increase too much."

Mr Franchitto said their major focus was now set on exporting their organic wines to China, North America, and Europe.

However, he said he was concerned about the recent wine grape price release to the industry in the Riverland for the upcoming 2019 vintage.

"We are probably seeing an increase of 20 to 25 per cent on last year … it's perhaps a bigger increase than what the market can absorb long term, or the Australian industry can absorb in a medium, long-term future … it's a pretty big jump all of a sudden," he said.

"I think it's going to be much tighter margins for us producers, exporters and wineries because there is no way that we can increase our pricing by 20 per cent and hence to remain competitive."

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Australia's largest wine market by volume is the United Kingdom, which is why exporters were keen to see trade continue without interruption when the UK leaves the EU.

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