Wine exports sour due to strong Aussie dollar

THE value of Australian wine exports has plummeted to its lowest level in a decade as the strong dollar buffets the industry and winemakers scale back exports of bottles in favour of bulk wine.

Just $1.96 billion of Australian wine was sold to international markets in the year to June -- down 32 per cent from $2.87 billion when the market peaked four years ago.

In its annual export report yesterday, Wine Australia said the appreciation of the dollar against the British Pound, which has increased the cost of Australian wine in the UK, was a key reason for the fall in exports.

The report also reveals far more wine is being shipped overseas in bulk and packaged there, rather than being bottled before export.

Bulk wine exports rose by 12 per cent to $335 million with a 9 per cent rise in volume to 342 million litres -- 47 per cent of the total volume of Australian wine shipments in the past year.

Wine Australia intelligence manager Peter Bailey said there was a significant drop in the value of wine exported to the UK, but a lot of it was being packaged there.

"We are trying to get a handle on how much of the bulk wine was previously packaged in Australia," Mr Bailey said.

"It is happening mainly in the UK, but also in the US and Canada because of the exchange rates, alcohol tax increases and environmental factors."

The report showed Australia shipped 728 million litres of wine overseas in the past year, compared with record shipments of 788 million litres in 2009-10.

By contrast the value of exports is down by a much larger proportion, dropping from a peak of $2.87 billion in 2006-07.

"The decline in bottled shipments has mainly come at the lowest-price segments with some producers increasingly choosing to send lower-priced wine in bulk to bottle in-market rather than in Australia," the report said.

The UK remains the largest market by volume, buying 254 million litres worth $469 million in 2010-11.

Wine shipments of 179 million litres to the US were worth $494 million.

China remains the great growth market, buying 51.5 million litres -- up 12 per cent -- worth $184 million, compared with $143 million the previous year.

Mr Bailey said the Asian market overall was growing strongly and by far the fastest-growing region for Australian wine with shipments to Hong Kong worth $52 million.

Canada is the third-largest market with shipments of 54.8 million litres worth $207 million.

The report said the value of bottled wine shipments fell by 13 per cent to $1.6 billion with volume down by 17 per cent to 377 million litres.