Australian wine hit by Coronavirus and trade wars
The Australian wine industry has had a challenging start to the year, between bushfires, the coronavirus pandemic and trade wars in US and China markets. Agribusiness Rabobank’s latest global Wine Quarterly report said that the local wine industry is rising each year but businesses have to create new marketing and sales strategies to overcome the slowdown in consumption in these markets.
The recent wine boom in China stabilised the impact of falling US consumption but trade disruptions due to the coronavirus is resulting in a decline in consumption in China.
Rabobank senior wine industry analyst Hayden Higgins said the global wine industry faces much uncertainty with international wine trade in 2020 with the first half of the year particularly challenging for local wine exporters.
The Q1 report said that despite the volume decline of 12 per cent in Australian bulk wine exports last year, they rose three per cent in value. Bottled wine exports declined five per cent in volume but increased seven per cent in value. Wine priced above A$20 per litre increased in value by close to 30 per cent (year-on-year).
Despite a 17 per cent decline in volume to China, sales increased in value by 12 per cent, with Australia now the largest wine exporter to China by value, and, in turn, China is the largest market for Australian wine by value.
“A major element affecting the global wine industry in recent months has been stagnant domestic demand in the United States, but now we are also seeing a shut-down in China due to the COVID-19 outbreak which is adding to the slowdown in Chinese wine imports experienced in 2019,” Higgins said.
He said that the coronavirus outbreak will also affect the demand for wine even after the disease subsides. US tariffs on selected EU wines was applicable only for the last two months of 2019, but may affect the entire year of 2020.
“All these factors may destabilise a market that is already reflecting the impact of ample inventories and slow trade,” Higgins said.
He said that there’s an abundance of global stock particularly red wines and uncertainties about demand were keeping prices “in check”.
The report said the industry must find ways to boost consumption in other key markets and entice new consumers, with investment in e-commerce and brand-building skills suggested.