Last year, China imposed huge taxes on the import of Australian wines as a result of which close to 550 million dollars have been wiped out from the trade. Now, the Australian wine brands are trying to diversify their market to get some fortunes. Australian winemakers are targeting the UK as their biggest market in 2022. Before the tax impositions, the Chinese wine trade was worth nearly £700 million a year to Australia and made up 41% of the overall value of Australian wine exports globally. Now, the trade has fallen off a cliff and is worth just £44.2 million.

According to Tony Battaglene, the Chief Executive of Grape and Wine Australia, “The UK has grown about 30 percent in the last three months.” Exports of Australian wine into the UK have continued to grow in almost all price segments, according to Wine Australia- the industry's governing body. In 2021, the exports increased by 7% to the UK and they are still rising steadily.

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Wine Australia’s General Manager, Rachel Triggs explained the growth and said “Over the past 18 months, there has been a significant increase in exports to the UK. This has led to the UK market solidifying its place as Australia’s number one destination by volume and it has now overtaken mainland China as the number one destination by value.” When asked about the UK being their only main market, “We're not going to be able to find one single market that will make up for China, particularly at the prices we were seeing in China prior to the tariffs being applied” she added.

Image Source: Wine Australia

Australian varietal wines are the most popular in the UK, with Shiraz/Syrah accounting for 29% of sales last year, followed by Chardonnay with 25% and Cabernet Sauvignon with 10%. The UK lockdown boosted sales during the first two and the last two months of 2020, according to Wine Australia.

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On 17 December 2021, the Australia-UK free trade agreement (FTA) was signed which will further increase the sales of Australian Wines in the UK. This trade agreement will eliminate taxes on Australian wines, removing around £23 million from custom duties on Australian wines. The FTA will not only benefit the big brands like Treasury Wine, Casella Wines, and Accolade Wines but will also help the smaller producers to break into the UK market. 

The 10 Australian wines that were awarded in the London Wine Competition, 2021 are listed below:

Mr. Riggs 2014 The Chap

Nest Egg Shiraz

Mitchelton Toolleen Single Vineyard

Mitchelton Spring Block

2018 Killibinbin Sneaky Shiraz

Brockenchack 2017 Jack Harrison Shiraz

Levrier by Jo Irvine 2015 Argos Shiraz

2019 Brothers in Arms Shiraz

The Lane Vineyard 2016 Reunion

Mitchelton Heathcote

Courtesy of all the wine images: London Wine competition

Compared to its closest competitors, France and Italy, Australia has nearly twice the market share in the UK off-trade market. According to 2020 figures, six of the top 18 off-trade brands in the UK were Australian (IRI).

Retail consolidation and a slow decline in per capita wine consumption pose challenges to the UK market, amid Brexit uncertainty, increasing exercises on alcohol, and a slow decline in excises on wine. Conversely, premium wine sales are rising and Australia has the potential to increase its market share there, as well as in on-trade and independent channels, where we are under-represented. 

Australian wine is well-established in the UK market, especially as affordable, popular, food-friendly, and wines that are recognized and recommended by consumers. According to Wine Australia's global brand health tracking study, wine drinkers are well-versed in Australian wines. There has also been an improvement in perceptions of Australian wine quality since 2010.

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But now, the Australian wine producers will have to face another challenge. Even though entry into the UK has been made easier for them, they’ll need to find a way to stand out from the crowd. As we already know the UK is a big and crowded place, which makes it even more competitive. The main point of difference is that Australian wines offer exceptional quality and variety at competitive prices. So with the right, professional support, the smaller Australian producers will be able to break through the crowd and reach their target audience.

An international market of multi-million pounds, like the UK, will be dynamic, complex, and laden with opportunities, as would be expected.  But the realisation of those opportunities varies from perspective to perspective. Overall, this trend of the Australian wine market rising in the UK is filled with excitement and would be greatly tested in the coming years.

Article by: Vidisha Dewan, Beverage Trade Network