China develops a taste for our finer wine

AUSTRALIAN winemakers appear to be slowly remaking their image as producers of cheap and cheerful plonk, with export figures showing the average price of exported wine rose slightly last year after four straight years of decline.

Government export marketing body Wine Australia figures showed the average price of wine sold to offshore customers rose 1 per cent last year to $2.69 a litre.

Even more encouragingly for producers, the average price of bottled wine rose by 5 per cent to $4.31 a litre, its highest level in more than two years.

"Given the Australian dollar has remained at historically high levels over this period, this is a positive result," Wine Australia said in statement.

China continued to be the strongest source of export growth, with sales up 23 per cent by value despite a 26 per cent decline by volume, reflecting a shift to more premium bottled wines, particularly reds, which were up 32 per cent by volume and 42 per cent by value.

China is Australia's third-largest wine export market, and is being targeted by winemakers including Treasury Wine Estates as longstanding customers Britain and the US continue to decline in value, by 23 and 15 per cent respectively.

Wine Australia said China was the largest customer for Australian wine priced at more than $7.50 a litre, reflecting the growing affluence of its middle class.

Asia was the standout region for bottled wine exports, up 24 per cent in value to $400 million, putting it just behind Britain's $412m in annual sales.

Overall exports by volume were 703 million litres, down 10 per cent from the previous calendar year, while sales by value were down 9 per cent to $1.89 billion.

"The decline in the volume of exports is not surprising given that the production of Australian wine has fallen over recent years, from a peak of 1.42 billion litres in 2005 to 1.07 billion litres in 2011," Wine Australia said.

"Stock levels have also fallen, reducing the availability of wine to export."

While Australian winemakers have been reducing their reliance on cheap, mass-produced bulk wine, an increase in buyers bottling wine for sale in their destination markets meant the proportion of wine shipped in bulk -- usually in large bladders or sealed shipping containers -- rose by three percentage points to a record 49 per cent.

Wine Australia said the trend was driven by economy, with buyers avoiding the cost of shipping heavy glass bottles halfway around the world, as well as the growth of in-house brands by retailers.

And while the industry has been in dire straits due to oversupply and the strength of the Australian dollar, it appears most players are refusing to quit, with the number of exporters rising by 2.8 per cent last year to 1279.