All crushed up and nowhere to go

Record wine production combined with a reduction in overall sales volume has seen inventory levels and stocks-to-sales ratios increase in the year ended 30 June 2021, according to Wine Australia’s Wine Production, Sales and Inventory Report 2021 released today.

The annual grape and wine sector report for the 2020–21 financial year confirms that the national wine inventory levels were the highest since 2005–06 at the end of June 2021.

Wine Australia Manager Market Insights Peter Bailey said that this result was not unexpected after the record-sized vintage crop, the sharp reduction in exports to mainland China, and global shipping difficulties that made it more difficult to get wine into markets.

“As we have previously reported, Australian wine exports in the year ended 30 June 2021 have been impacted by reduced wine availability for the past two years, as well as the tariffs imposed on Australian wine to mainland China in November 2020. The combination of these factors caused exports to decline by 5 per cent over the 2020–21 financial year,” Mr Bailey said.

“Within our domestic market, we are seeing a gradual long-term decline in the volume of wine consumption that is in line with other mature markets globally, combined with short-term COVID-related disruptions and some competition from imported wine.”

Total sales volume of Australian wine in the 2020–21 financial year is estimated to have decreased by 4 per cent compared to 2019–20 to 1.17 billion litres or 130 million cases, with both exports and domestic sales declining.

Total Australian wine production in the 2020–21 financial year is estimated to have been just under 1.5 billion litres, or 165 million 9-litre case equivalents, a 34 per cent year-on-year increase after near-perfect growing and ripening conditions in most states and regions delivered a record 2021 vintage crush of 2.03 million tonnes.

Production of red wine from the 2021 vintage was 854 million litres or 95 million 9-litre cases, making up 58 per cent of production and increasing its share by one percentage point since 2020. White wine production was 628 million litres (70 million cases).

Mr Bailey said that based on these figures and preliminary estimates from the International Organisation of Vine and Wine (OIV), Australia was the fifth largest wine producer in the world, accounting for 5.7 per cent of the global 2021 harvest.

“The large volume of grapes harvested around Australia in 2021 compensated for two low vintages in 2019 and 2020, with the average of the three being just above the 10-year average of 1.74 million tonnes,” Mr Bailey said.

As a result of the increase in production and reduction in sales, the national wine inventory as at 30 June 2021 increased by 24 per cent to 2.1 billion litres. The stock-to-sales ratio overall increased to 1.8, 23 per cent above the 10-year average of 1.46.

“The increased production combined with a reduction in sales is likely to put pressure on tank capacity for some wineries heading into the 2022 vintage,” Mr Bailey said.

“This report provides an overall indication of the sector’s position. Every business is different and the past 12 months have seen a range of experiences. However, there is no doubt that this is a particularly challenging time for the Australian wine sector. The report underlines the importance of market diversification as the key to long-term sustainability, while good communication between all players in the supply chain is critical to manage the short-term issues.”

Wine Australia’s Wine Production, Sales and Inventory Report 2021 is available at wineaustralia.com.