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May 30, 2022 View:

Australian wine industry grows significantly after year with more low-priced wines shipped to Hong Kong

The Australian wine industry is expected to grow from A$11.3 billion ($7.9 billion) in 2019 to A$12.7 billion ($8.7 billion) by 2024, at a compound annual growth rate (CAGR) of 2.4%, said data analytics firm GlobalData.

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GlobalData"s "Australian Wine - Market Assessment and Forecast to 2024" report reveals that the wine industry is primarily driven by the growth of the sparkling wine category, which is expected to grow at the fastest CAGR of 2.7% in terms of CAGR during 2019-2024. It will be closely followed by non-sparkling and alcohol-fortified wines, which are expected to grow at a CAGR of 2.4% and 1.6% respectively over the next five years.

Favorable economic conditions for wine production, combined with the willingness of Australian consumers to spend more on premium wine products, are driving the growth of the Australian wine industry. In addition, millennials (20-34 year olds) form a crucial consumer group as they see wine consumption as an important part of their social life and quality time spent with family and friends, said Sanchi Agarwal, GlobalData consumer analyst.

Per capita wine expenditure in Australia declined from $450.2 in 2014 to $379.9 in 2019, above the global level ($73.8) and the regional level ($32.6). However, per capita consumption of wine in Australia is expected to reach $385.4 by 2024.

Australian consumers are very picky about the quality of their wines and consider wines containing artificial or synthetic additives/preservatives to be hazardous to health and therefore unfit for consumption. This consumer concern for the purity of ingredients and wines has prompted winemakers to use organically grown grapes in their winemaking, Agarwal added.

More low-priced Australian wines will be shipped to Hong Kong after the year

Wine lovers from Hong Kong may soon reap an unexpected benefit from the deterioration of relations between mainland China and Australia: their favourite Australian wines will become cheaper.

Australian wine products, one of Australia's most lucrative markets, are being hit by high import tariffs. Some analysts believe that as distributors are unable to import Australian wine into mainland China without paying high tariffs, they may decide to move their stocks to Hong Kong, flooding it with low-priced Australian wines.

However, wine lovers and investors may have to wait until after the Chinese New Year to see prices fall, as most of the wine needed during the festival has already arrived in mainland China.

During the peak Lunar New Year season in February, some companies reduced their imports of Australian wine and also reduced stocks of wine already shipped to mainland China through bonded warehouses.

Hong Kong Wine and Spirits Association President Ho Yiu-hung said that some wines that are already in transit due to existing contractual obligations will be transferred to Hong Kong, but only for temporary storage.

He said:Optimistic importers who believe the trade conflict will not last may one day move their inventory in Hong Kong back to the mainland. They will not give up the mainland market for Hong Kong.

The chairman of the Hong Kong Wine Merchants Association said the mainland tariff would not have a knock-on effect on the price of Australian wine in Hong Kong because the two markets are so different.

Watsons Wine, Hong Kong's largest specialty wine retailer, is offering substantial discounts of 30 to 43 percent on 28 wines last December and this January, including the 2017 Penfolds RWT Syrah and the 2018 De Bortoli Gamay. Supermarket chain Wellcome is selling the 2019 Penfolds Koonunga Hill Chardonnay for HK$83, originally priced at HK$200.

But Li Li Yin believes that these businesses may be pursuing thin margins and quick sales, as high store rents and employee wages have put a lot of pressure on the retail industry during the recession caused by the outbreak.