Australian Wine Export Approval Report -- December 2008

Australian wine exporters endured a challenging year in 2008. In the first half of the year, the strong Australian dollar placed enormous pressure on Australia's price competiveness in major export markets. A low 2007 winegrape harvest and the expectations early in the year of another low harvest in 2008 placed uncertainty on supply.

In the second half of the year, price pressures were somewhat reduced by the depreciation of the Australian dollar, while the higher than expected 2008 harvest eased supply constraints. However, the global financial credit crisis started to take hold in many of Australia's wine markets placing additional pressure on exports.

Despite the challenges there were some highlights during the past 12 months, particularly in Asian markets. The top five destinations for absolute value growth in Australian wine exports in 2008 were, in order, China, Denmark, Hong Kong, United Arab Emirates and Japan.

China was the clear stand-out with the value of exports to the market increasing by 32% (A$18 million) to A$74 million. This ranked China as Australia's fifth largest market by value (up three places) but first in value growth. Asia outperformed both Europe and North America in the change in volume and value shipped during 2008 and the value of shipments to Asia grew by 8%. The average value of shipments to Asia was almost double that of shipments to Europe.

The total volume of wine exports in the MAT period ended December 2008 declined 11% to 698 million litres, value fell 18% to A$2.46 billion and the average price declined 8% to A$3.53 per litre.

These results come after more than a decade of extraordinary growth in Australian wine exports, culminating in reaching the A$3 billion milestone in 2007. A slowdown was not unexpected given such factors as the global financial crisis, exchange rate volatility, continuing intense competition from other suppliers, tightening margins, and an extended drought causing initial supply uncertainty .

Volume exported during the year was still the fourth highest on record for a calendar year and value exported was the fifth highest.