PLANNING AHEAD

June 6, 2020

After reading the recent Wine Australia Market Bulletin (see extract below) Dan felt this subject should be further commented upon:

Extract from Wine Australia’s MARKET BULLETIN – ISSUE 200: “More than half of Australia’s wine exports by value go to Asia. While Australia’s total wine exports grew by 3 per cent in value in the latest 12 month period, exports to Asia grew by 12 per cent. The average value of our exports to Asia was $8.64 per litre free on board (FOB) compared with $3.98 per litre FOB across all markets.

While we export to 25 different markets in Asia, the top five destinations: mainland China, Singapore, Hong Kong, Japan and Malaysia account for 93 per cent of the total value (see Figure 1). This week’s market bulletin looks at how each of these important markets for Australia fared in the first quarter of 2020 and assesses the early effects of COVID-19 on wine consumption….”

When we first shipped wine into China in 2003, Asia accounted for 4.6% of Australia’s wine exports. Today it accounts for more than 50% and as you can see from Figure 1 most of the wine goes into China.

Australia and China are currently having a rocky political relationship as Australia tries to be friends with both China and the USA – no mean feat!!

If COVID-19 has taught us anything, it is to be prepared. Imagine this: There is a spat over say the South China Seas islands and China bans all imports of Australian wine for say 6-12 months, which given recent events is quite possible . How would the industry cope with that? As can be seen from the Figure 1 chart, not so well. The probability of making significantly higher sales to the EU, UK or USA are fairly minimal.  Therefore the chances are that a few more wineries will “go to the wall”.

As I have been suggesting for quite some time now, isn’t it about time to look at/focus on other countries in Asia apart from China?

For a start, Australia now has Free Trade Agreements (FTA’s) with Japan, Korea and Taiwan as well as with the ASEAN group, so that our wines have a preferential tax rate to those over some other countries who sell to these nations. The potential impact of an FTA can be best demonstrated by the performance of Chilean wine in Japan. In around 2007 both Australia and Chile started negotiating their FTA with Japan. Chile signed theirs two to three years later, whilst due to intransigency by the then Australian Federal Government, the Australia/Japan FTA took neigh on eight years to sign. In the intervening five years Chile taking advantage of their FTA went from No.5 wine supplier to Japan, to No.1. Even outselling France in the same time frame Australia went from No.6 to No.5.

Apart from the countries just mentioned, serious consideration should be given to Vietnam (whose economy is undergoing China-like expansion and growth), Thailand, Malaysia and even Indonesia. Most people shy away from Indonesia because it is a Muslim country but there are over 7 million non-Muslims and expats living there, so it would be like ignoring a market the size of Melbourne and Brisbane combined.

All of these countries have challenging (to us) import rules and regulations, however, back in 2003 the Chinese rules and regulations looked daunting too – today not so much.

The two countries I did not mention are Singapore and Hong Kong, because in my opinion they are reaching or have reached saturation point and are incredibly competitive markets to try and enter.

So what I am saying is please think “outside the square” (Hey, we have even shipped wine to Timor-Leste on behalf of one of our clients!) when looking at export markets because time and time again, in the past, the old, “too many eggs in the one basket” adage has caused many in the Australian wine industry grief.

This Week's Wine Review:

This week I am talking about the emerging Italian white variety, GRILLO.

As we have recently found out with a few other varieties, the original cuttings brought into the country were from the incorrect variety – in this case the vines were actually the Croatian variety, SLANKAMENKA, rather than GRILLO. As a result the variety had to start again here so that there are currently only three wineries producing true GRILLO, with another two to three growing it and thus soon to release wines.

GRILLO in predominantly used in Sicily to make Marsala. As a variety it produces a crisp, bright, textural white wine with plenty of flavour.

The variety is quite resistant to hot weather, which augurs well for it in the warmer climes here in Australia like the Riverland. However, the early plantings are in the Adelaide Hills and McLaren Vale.

Today’s wine is the LINO RAMBLE 2019 McLAREN VALE “SOLITAIRE” GRILLO. With his passion for Mediterranean varieties, winemaker Andy Coppard, puts stacks of TLC into this wine and it shows. In order to preserve the primary fruit characters, he cool ferments the grapes using wild yeasts, with minimal sulphur being added.

It has attractive aromas of grapefruit, pears and melon. The palate is rich with a lovely textural feeling, oodles of pear and melon flavours with a smidge of citrus, great balance and a delightful refreshing finish.

Whilst all the wines from LINO RAMBLE are worth looking out for and trying, the other superstar in their line-up (in my opinion), is their Fiano, which is utterly stunning. So do your palate a favour and check out LINO RAMBLE at www.linoramble.com.au

Cheers, enjoy great wines and stay safe!