Australian wine exports slump but Hong Kong market shows promise with surge in value

The Australian wine export industry is facing 'extremely challenging' trading conditions globally after reporting a drop of 2 per cent to $1.9 billion in 2023, but on a more positive note the sector recorded its best December quarter in three years at $600 million and saw a spike in shipments to Hong Kong.

According to the latest annual report by Wine Australia, Hong Kong became Australia's third-largest wine export market by value in 2023 after uncorking a 74 per cent rise to $290 million - an increase that also reflects a higher value per bottle as the market did not feature in the top five by volume.

The value jump is much higher than Hong Kong's 28 per cent increase in volume to 9.4 million litres, making it the second-largest Asian market on that basis behind Japan which purchased 11.8 million litres of Australian wine but at a value of just $46.6 million.

When assessing any exports to Hong Kong it is always worth comparing the data with mainland China for any substitution or re-export effects.

In this case export volumes to the mainland were cut in half but only to 1.4 million litres, which means Hong Kong is receiving roughly triple what mainland China received in 2022.

The shift towards higher-value wines was also seen in Singapore, where volume dropped by 16 per cent to 7.2 million litres but value was up 1 per cent to $133 million, making it Australia's fifth-largest market.

Australia's overall volume exported globally declined by 3 per cent to 607 million litres.

Around 85 per cent of that volume - or 517 million litres - was sent to Australia's traditional northern hemisphere markets of the UK, US, Canada and continental Europe, but these same markets only accounted for 55 per cent in value terms.

These markets may be Australia's mainstays for moving litres, but their declining share of export returns reflects a trend towards premiumisation. 

The report takes note of trends towards health and wellness, where some are either abstaining from wine or drinking less but paying more, and others are seeking no or low-alcohol options. 

The industry body notes these trends disproportionately affect Australia, given the majority of Australian export volumes are in commercial segments.

But some Australian exporters are adapting. Overall there has been a 49 per cent climb in the sales for Australian wine in the price segment of $50 to $99.99, and these wines account for 13.5 per cent of total sales.

The only other price segment that saw an uptick overall was $200 and over, almost doubling to $67 million. More than half the wines Australia sold abroad however were worth less than $5 a bottle.

Wine Australia's manager for market insights, Peter Bailey, says that Europe and North America drove the reduction in Australia’s export value over the year, declining by 7 and 12 per cent 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," Bailey explains.

"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."

Bailey says this has led to a declining share of export value for these markets, while Asia's share has grown to 37 per cent.

"Hong Kong and Singapore were stand-out destinations for Australian wine in Asia, driving the growth of value to the region," he says.

"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."

Strong value growth was seen for these destinations as well as New Zealand, the UK, Thailand and Malaysia in the last three months of the year.

"Australia’s 2023 wine export results reflect the challenges being felt across the wine sector globally," says Wine Australia's general manager of marketing Paul Turale.

"The December-quarter performance has shown some growth but there are still many hurdles for the sector.

"We remain clear on these hurdles but are confident that the extensive activities planned in 2024 will assist in building sales and distribution across emerging and established markets."

Varieties that showed growth include Cabernet Sauvignon (up 2 per cent; 85 million litres), Merlot (up 3 per cent; 39 million litres), Pinot Gris/Grigio (up 21 per cent; 47 million litres), Colombard (up 13 per cent; 9.2 million litres), and Semillon (up 5 per cent; 6.4 million litres).

The industry body reports the number of Australian wine exporters increased to 1,298 in 2023, representing an increase of 140 on 2022 but still well below the peak of 2,912 in the 12 months to February 2020.

The destination with the highest growth in the number of exporters amongst the top 20 markets was Hong Kong, followed by Taiwan, Thailand and Vietnam.

Destinations that lost the most exporters included the US, Denmark, New Zealand, Singapore and the UK. Japan has overtaken the US by total number of exporters.