New world wines: an update – Industry Overview
During 1995 the international wine market for “New World” producers Australia, Chile and the United States, grew faster than ever before, in spite of supply shortages and increased prices from all three. As the market is strengthening in major wine consuming countries, particularly in the U.S. and Europe, there is considerable pressure on supply from these producers in the short-term. Generally, because of extensive new plantings of classic varietals, the mid and long-term international market looks favorable for Australia, Chile and the U.S.
Australia continues to lead the way with total wine export revenues of $354 million or 24% ahead of 1994 and with the leading premium international market position of the three producers. Supply constraints limited Australia’s overall volume growth to only 9 million liters for total wine exports of 123 million liters; however, the average price increased by 14% to $2.87 per liter. Australia continues to rely on the U.K. market for over 40% total export revenues or one third of volume that last year grew by 16% in revenues and 10% in volume. The U.S. market ranked second and probably represents the greatest opportunity for future growth for Australian wines. Last year exports to the U.S. grew by 30% in value and by 23% in volume for Australia. Consistent with 1994, other markets of importance for Australia were New Zealand, Canada and Sweden. The top five markets represented almost 80% of Australia’s wine export revenue. Australia will continue to be in short supply of red grapes for the next few harvests, as white grapes return to supply balance.
U.S. wine exports, of which California accounts for over 90%, followed Australia, with revenues of $242 million or 27% ahead of 1994. Volume grew by 13% to 141 million liters for an average export price of $1.64 per liter. The U.K. market surged into the leading position, with annual revenue growth of 58% to a total of $60 million or 34 million liters in volume. Canada slipped to second place, only 4% ahead of 1994 in value and down 14% in volume.
Other markets in the top five for U.S. wine exports were Japan (+38%), Switzerland (+86%) and the Netherlands. In total, the five largest markets accounted for 70% of U.S. export revenues. The challenge in 1996 will be to maintain last year’s growth in the international market at the competitive prices required, during the current period of unprecedented national wine market growth combined with increased wine prices in California and a severe shortage of supply.
Last year Chilean wine exports grew to $174 million or by 22%, to a total volume of 125 million liters. The U.S. remains Chile’s strongest international market for bottled shipments representing over 23% of total export revenues, almost 20% of volume for a total of 24 million liters exported. Consistent with strong growth last year for U.S. wines, the U.K. market almost doubled in revenues for Chile to over $26 million, for a volume of 14 million liters, most of which was bottled product. The Canadian market continued to increase and the combined volume of bulk and bottled imports from Chile were level with the U.S., as other traditional bulk sources, notably Australia, were forced to decrease supply to Canada. However, the value of Chilean exports to Canada was less than half the U.S. value. Over the years Chile has relied less on their top five export markets than Australia and the United States. Last year the leading markets grew to 58% of total revenues and for the first time all were located in the northern hemisphere, indicating the trend towards global acceptance of Chilean wines and a shift away from the historical reliance on exports to other Latin American countries. In recent months the world demand for bottled and bulk Chilean wines has increased prices on the local market and Chile’s challenge will be to keep up with world demand while new acreage comes into production.
(Robert Nicholson is the principal of International Wine Associates, a management services company based in Healdsburg, California, that works with wine companies in the U.S. and overseas on general management, financial, strategic planning and marketing matters and assists in buying and selling companies in the industry. He can be reached at P.O. Box 1330, Healdsburg, Calif. 95448. The telephone is (707) 433-8122; the fax is (707) 433-7519.)
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