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White wine revival: Australia’s industry battles decline with strategic adjustments
The Australian wine industry is facing a challenging landscape in the 2023–24 fiscal year, as outlined in the latest production, sales and inventory report from Wine Australia.
Despite some positive trends, the sector is navigating a complex mix of production decreases, shifting consumption patterns and global economic pressures.
The 2024 Australian winegrape crush reached 1.43 million tonnes, a 9% increase from the previous year but 18% below the 10-year average of 1.73 million tonnes. This marks the second consecutive year of significantly below-average harvests.
Meanwhile, the total wine production rose by 8% to 1.04 billion litres, although this was still the second-lowest total since 2006–07, and falls 16% short of the 10-year average.
White wine rises
However, white wine production saw a resurgence, growing by 20% to 531 million litres, marking the first time since 2011–12 that white wine production has outpaced red wine. Conversely, red wine production declined by 2% to 511 million litres, significantly below its 10-year average of 671 million litres.
Peter Bailey, manager of market insights at Wine Australia, attributed the below-average production to a combination of challenging seasonal factors and economic conditions.
“This was another difficult season in many regions, with heavy rainfall and flooding, widespread windy conditions affecting flowering, and dry spring weather leading to cold nights and the potential for frost damage,” Bailey said. “However, the result has also stemmed from deliberate decisions by grape growers and wine businesses to reduce production or intake, driven by the current economic and market conditions affecting demand for wine.”
Sales trends
Australian wine sales volume declined slightly, with total sales reaching 1.08 billion litres, a 0.7% drop from the previous year and 11% below the 10-year average. Domestic sales accounted for 42% of the total, up from 37% in 2017–18 when exports peaked. White wine sales domestically grew by 3% to 200 million litres, while red wine sales fell by 5% to 179 million litres.
On the export front, total sales volume remained virtually unchanged at 619 million litres, marking a 20-year low. However, the reopening of the Chinese market following the removal of tariffs in March 2024 spurred a surge in red wine exports to China, which reached 32 million litres from a mere 1 million the previous year. Despite this boost, export volumes to other markets declined, indicative of continued challenges in global trade.
National wine inventory for Australia as of June 2024 stood at 1.96 billion litres, a 10% reduction from the previous year and closely aligned with the 10-year average. While white wine inventory levels dropped 10% to 621 million litres, they are now 8% below the decade-long average, reflecting more balanced stock levels. Red wine inventory, however, remains high, with a stock-to-sales ratio (SSR) of 2.13 – indicating over two years of stock on hand, despite a 15% decrease from the prior year.
“The survey results indicate that stock-to-sales ratios have reduced, and production and sales are closely aligned. However, that is based on the current production levels, which are well below the long-term average,” Bailey said. “Any increase in production is likely to result in stock levels rising again, unless there is a corresponding increase in sales. This is a particular concern for reds, where the stock-to-sales ratio is still well above the long-term average.”
In terms of revenue, the Australian wine industry experienced a notable increase. Total domestic wine sales value rose by 9% to AU$3.54 billion, driven by a 10% rise in average sales value to AU$7.75 per litre. Export value also increased, climbing by 17% to AU$2.19 billion, resulting in a total sales revenue of AU$ 5.73 billion – a 12% year-on-year increase.
Wider implications
Global wine production in 2024 is projected to hit its lowest level since 1961, exacerbated by adverse climatic conditions. Despite this, global supply is expected to exceed consumption, which continues to decline due to moderation trends, economic pressures and rising competition from alternative beverages. The International Organisation of Vine and Wine estimates global wine consumption in 2023 was the lowest since 1996, at 22.1 billion litres.
For Australia, domestic wine consumption has decreased by 9% over the past seven years, influenced by similar global factors. Wine Australia’s report anticipates further domestic and global demand declines in the coming years, reiterating the need for strategic alignment of production with market realities.
“There are no easy solutions for increasing sales,” Bailey said. “Total global wine imports to China have fallen by two-thirds since 2017, so it is unlikely that we would return to our previous level of exports to that market. Meanwhile, our wine sales to the rest of the world, including Australia, have been under pressure for the past several years as consumption has declined and competition has increased. We are unlikely to see a return to our previous average of 1.2 billion litres in the next few years.”
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