Australian bulk wine exports to UK increase as producers seek out alternative markets to China

Soaring bulk wine exports to the UK and Europe are shoring up the Australian wine industry which is desperately seeking alternative markets following the effective closure of China after it imposed swingeing tariffs on Australian wine at the end of last year.

As a result, Australian bulk wine exports have surged by 11% to a record high of $576.8 million, while bottled shipments were down by around 15%, reflecting the sharp decline in packaged exports to China.

While  bulk wine exports to China are not subject to the same tariffs as bottled wines, there has, nonetheless,  also been a drop in bulk wine sales, which have  nose dived by over 20%  from  $55.4 million in 2019-20 to $34.1m.

Bulk wine accounted for 60% of Australia’s exports in 2020-21, significantly up on the long-term average of around 55%. This came on the back of a 5% increase in volume to 416.6 million litres and a 6%  increase in price to an all-time high of $1.38 per litre. 

It is the UK dominates Australia’s bulk wine export market, shipping $304.9 million worth in 2020-21, up by nearly a third ( 32%) on the previous year, while Germany, Denmark, Belgium, the Netherlands, France, Sweden and Finland also increased their Australian bulk wine purchases. And this increase is forecast to continue as wine originally destined to be bottled and shipped to China has become available to bulk or commercial producers, putting a downward pressure on prices.

However, the rising cost of Australian wine in recent years caused by strong demand from China has until recently resulted in a reduction in bulk wine export volumes, notably to the price-sensitive UK market.

While the recent shift in demand and supply  for bottled wine exports is bad news for many grape growers it could be positive for bulk wine exporters such as  Stepney-based Austwine which ships some 50 million litres of bulk wine each year mainly to North America and western Europe.

“Prices are down because of the policy change in China so all of a sudden Australian wine has become much more competitive and I think there will be continued levels of good growth of Australian wine in the UK because of lower prices,” CEO Jim Moularadellis told InDaily.

Meanwhile, the Chinese tariff situation had been exacerbated by the shortage of containers and ships available to carry Australian wine overseas. “We’re seeing very significant delays and very steep increases in the cost of shipping because of the tightening of that container and shipping market,” said Riverland Wine chief Chris Byrne. “We’re also going to see a significant overhang of red wine in the coming 12 months – overseas markets are well and truly aware of that. That  demand will remain, he added, but it was questionable as to whether it could be satisfied, because of the problems with shipping  “I think because of the overhang then inevitably the supply/demand circumstance is going to put significant downward pressure on price per litre of all Australian wine.”

Another issue is the record 2021 vintage. While usually a bumper harvest would be cause for celebration, this year’s record crop will replenish stocks and more, prompting wine companies to reassess their grape contracts for 2022. Byrne said this meant that many producers that had made red wine for export to China were bolstering bulk wine stocks. “The wine is still there in tanks and it’s got to be cleared otherwise we won’t have room to take in next year’s vintage and that basically means making it available on the bulk market and selling it at a rate per litre rather than an amount per case,” he said.