Analysis - China obstacles divert premium Australian wine to global growth
Australian wine is finding growth at the premium end
Treasury Wine Estates has admitted to a long-time legal tussle over its Chinese name, which has reportedly been appropriated by a “trademark squatter”.
The Australian wine maker says it is confident it will resolve the issue, but the drawn-out fight highlights one of the many obstacles facing beverage firms doing business in China. Top of the list for the past year has been the anti-austerity measures that have hit wine and spirits sales hard, especially at the high-value end of the market. A new report out today (15 July) from Wine Australia confirms just how badly the country's wine industry has been affected by the measures, with export volumes to China down 10% in the past year. This could be bad news for Constellation Brands, which earlier this year announced a new partnership in the country as it attempts to boost sales of its Robert Mondavi brand.
But, out of adversity comes opportunity. According to Wine Australia, the difficulties in China have forced Australian producers to look elsewhere. With high-end wine worst hit by China's slump, growers have started touting their premium labels in other corners of the world, Wine Australia says. According to the figures, they have found some success, with the average export value for bottled wine increasing despite a drop in volumes, suggesting a growing premiumisation trend.
In the UK, Australian wine's biggest export market, bottled wine above AUD7.50 (US$7.30) per litre increased volumes by 14% to 2.2m litres, the first time since 2007 that this segment has recorded growth in a financial year.
It was a similar story in the second biggest market, the US, where bottled wine exports above AUD7.50 per litre increased volumes by 8% to 4.3m litres. Compare this to bottled wine under AUD5.00 per litre, which saw volumes drop by 7% to 100m litres.
That trend was repeated in other main markets, including Germany and Canada, as well as in the rest of the world.
So despite its current headache in China, Treasury has at least one reason to smile. Its new CEO last month firmly set the company on a global premiumisation path. These latest figures may go some way to proving the wisdom of that policy.
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