Australian Wine Exports to the UK

Less than twenty years ago, when exporting and dumping meant effectively the same thing in much of Australian wine, the English market was viewed by many substantial Australian wine producers as the rug under which much of their unwanted rubbish was swept. You didn’t get much in return for shipping your wine half way around the world, but it kept the accountants at home happy. How things have changed.

From the 2000 vintage the awakening giant that the Australian wine industry is becoming produced more than 806 million litres. In the twelve months to the end of February this year it exported around 320 million litres, 154 million of which found their way in some form or other to the United Kingdom. That means that the UK presently accounts for virtually one in every five containers of wine that Australia makes, and that amount is still increasing fast.

For how long will it continue to increase? A few more years, unless the unexpected happens.

At about the pace we’ve witnessed over the last decade and more? Unlikely.

Will the UK remain a major market for Australian wine? Eighteen million thinking Australians certainly hope so.

Australians have always made wine for the English to drink. Goes with whipping their sporting teams and bitching about their food. Just over a century ago our country was referred to as ‘John Bull’s Vineyard’, tongue only slightly placed in cheek.

Prior to the First World War much of the top end of the Australia’s wine production was specifically made for the UK, not to mention some of the cheaper, richer, sweet and fortified stuff at the other end of the scale. Exports to the UK were 6,300 litres around 1854, but had increased to 230,000 litres within a decade. The pre-war peak was in 1902, with exports of nearly 4.5 million litres. It was economics and politics that ruined most of Australia’s premium wine industry after then, since the country’s output was excessively geared to a dangerously small number of export markets.

With the UK presently taking 48 by volume of all Australian wine exports, there’s an urgency evident amongst Australia’s larger makers to spread their strategic risks to ensure the same thing doesn’t happen twice. They’re seeking to diversify into the various Asian and North American markets, many of which are yet to receive serious attention from the big Australian players for the very real reason that they couldn’t meet anticipated demand.

As far as most serious Australian exporters are concerned, the US is a substantially less mature market still on a steeper growth curve than the UK. Its value increased against the UK market in the last twelve months by $A 115 million against $A 96 million, while it increased in volume by 26 against 19. Where it all ends remains to be seen.

Is Australia excessively dependent on the UK market?

In a nutshell, yes. As Rosemount Estate’s Global Brand Director, Neil Hadley MW remarks, any Australian wine company worth its salt would now be looking to diversify away from a dependence on the UK. The present degree of dependence is based on the solid foundation of some of the UK’s strongest brands. Orlando’s Jacob’s Creek, for instance, has the highest unaided brand awareness of any wine brand in the UK, according to Orlando Wyndhams’ Marketing and Internation Director Stephen Couche, who rates the strength developed by major Australian brands as an enormous advantage against its competitors.

Ross Brown, recently appointed as Chief Executive of the successful family-owned Brown Brothers operation, says that a significant decline in Australian wine sales to the UK would have a significant impact on the health of the domestic Australian market. ‘If you did a SWOT analysis, you’d see the UK market as a risk’, he says, adding that progressive growth for Australian wine in new European markets like Scandinavia and Germany should balance things out in time.

Back in the UK itself, Stephen Couche anticipates further growth for Brand Australia, especially in the northern counties where per capita wine consumption has yet to rival that of the south and the southeast. Reflecting on how Australian wine has made strong recent inroads into the Republic of Ireland, he isolates the on-premise pub market in the UK as a potential source of growth, adding that per capita income consumption of wine has yet to peak in the UK. The Australian industry expects it to reach 17 litres per capita. He’s also ‘pretty positive’ about the UK’s take-home sales, where current projections suggest that sales of Australian wine will overtake those of France in the near future.

Neil Hadley says that it’s crucial for large and small Australian players in the UK market to work hard to maintain constructive relationships with each of the major players in the UK retail market. ‘It’s a high risk situation, and if one of them decides they don’t need you any more it places serious pressure on sales budgets’, he says. ‘You only need to lose one retailer and all of a sudden your business can be down by fifteen to twenty percent’.

On the other hand, argues Hadley, if you’re confident in your ability to maintain these relationships by providing wine that retailers can sell with good margins and wine that consumers will continue to enjoy, it’s a market Australians are well equipped to satisfy. ‘There’s no point wishing there were more distribution options’, he says. ‘The bottom line is to be professional and just get on with the realities.’

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