Sep 17, 2019
Australian winemakers benefit from drop in Australian dollar
While a weak Australian dollar might not typically spell good news for many, those in the wine industry see a marked growth in exports when the dollar drops.
The Australian dollar is heading for its lowest levels for more than a decade, potentially falling below US70 cents in what is a fortunate coincidence for the country’s wine industry. This drop sees Australian wine becoming increasingly competitive in the overseas market, signalling the time for a large promotional push in both the US and Chinese markets as a way to boost export earnings.
Competitive US market
Previous experience shows the significant boost to export revenue when the dollar declines. When the Global Financial Crisis hit, Australian wine exports to the US - the world's biggest market - were valued at around $1 billion. During this period, the Australian dollar was below US70 cents.
In the past decade since the Australian dollar rose to above $US1.10, Australian wine became less competitive in the US and sales declined, seeing them valued at just $432 million.
Australia front runner in Chinese market
Perhaps one of the most significant areas of growth for the Australian wine industry during this period is within the Chinese market, with a recent report identifying Australia as the “clear winner” among countries that export wine to China. In fact, for the first time ever, Australia has beaten France for the number one position in the market.
Wine exported from the US to China is subject to a levy of 106 percent, including tariffs, making it on average 64 percent more costly than Australian exports. On the other hand, Australian wine continues to benefit from the free trade agreement, making its prices much more appealing and competitive that its American counterparts.
In the first four months of 2019, Australia's share of the imported wine market jumped to 25.7 percent, up from 19.8 percent in the same period of 2018, showing phenomenal potential for winemakers.
Some industry professionals have voiced concern that such a dependence on the Chinese and US markets can be risky because, in the chance of economic or political instability, exports could take a dive.
For this reason, many are advocating to improve diversity within the Australian market, so as to “future proof” the sector. There are calls for greater investment in marketing and brand-building strategies in emerging overseas markets, such as Africa and other parts of Asia to allow wine exporters a chance to gain a greater foothold in these key economic regions.
With the export market showing such strong signs of growth, now is the time for businesses to expand their offerings and take advantage of this opportunity. Let CozWine assist you in sourcing talent that will help your company reach its potential and contact us today.