2020 has brought with it many disruptions to the wine sector. The influence of COVID-19 lockdowns, social restrictions and panic-buying has now largely stabilised.* As part of the COVID-19 impact on this trend, local products should increase in popularity, accelerated by travel restrictions and closed borders during the pandemic. Is this the case for domestic wines in Australia?
With the highly publicized short-term increase in retail alcohol sales came some concern that Australians had increased their overall alcohol consumption in response to the pandemic and associated restrictions - a study conducted by the Alcohol and Drug Foundation reported that 12% of people in Australia drank more alcohol during lockdown. However, counteracting that, 20% of respondents in the study reported decreasing their drinking and a further 4% stopped drinking altogether, making it very unlikely that overall consumption increased.
The first stages of lockdown across Australia saw an initial rush of panic-buying and the total closure of the on-premise (restaurant and bars). There were big reported increases in wine sales in the retail off-trade. In the week ending 22 March 2020, wine sales in the liquor retail off-trade increased by 39% compared with the same week 12 months before, according to IRI MarketEdge scan data.
However, the size of this increase has not been sustained. Overall wine sales in the retail off-trade increased by 9% in volume in the June quarter and by just 3% when measured across the whole 2019–20 financial year. The positive growth rate is significant, as it reverses a trend of declining volumes over the past two years, but it is not enough to replace volumes lost in the on-trade over the three months of lockdown in most states and territories.
The on-premise would equate approximately to a 5% overall loss to the market, more than off-setting the 3% increase in the off-trade. Another channel where wine sales are expected to have increased in 2019–20 is direct-to-consumer – particularly online sales from wineries’ websites.
Direct-to-consumer (DTC) sales make up an estimated 17% of total wine sales value, but for the majority of Australian wine businesses, which produce fewer than 20,000 cases, DTC sales account for more than 50% of wine sales value and are therefore critical to their success and sustainability.
The direct-to-consumer channel grew by 7% in value in 2019–20 compared with the previous year, outperforming other sales channels. The strong growth in online sales is consistent. Although value of sales declined overall for cellar doors, the average value per case increased by 5%. It was also the largest source of DTC revenue, with 35% of total DTC sales value.
IRI MarketEdge reported that Australian wine's share of total domestic retail off-trade wine sales increased by 1.5% point during March 2020, supporting this prediction of a move to ‘buy local’. However, this has not persisted across the longer term. In the year ended June 2020, imported wine sales in the off-trade grew by 7% in volume, compared with 3% for domestic sales, and increased its share of total off-trade wine sales from 12% to 13%.
New Zealand remains the number one imported category. However, over the 2 years, sales declined by 3% in value and 4% in volume. France was the major growth driver in the imported wine category. Sales of French wines increased by 10% in value and 18% in volume.
Shiraz has overtaken Sauvignon Blanc has the number one selling variety by value. Shiraz sales grew by 9% over the period while Sauvignon Blanc sales declined by 5%. There were mixed results for the other categories in the top five. Chardonnay sales declined by 2%, Cabernet Sauvignon sales increased by 5% and Sparkling white sales declined by 6%. Categories outside the top 5 showing solid growth include Pinot Noir (+17%), rosé (+56%), Prosecco (+73%), Pinot Grigio (+15%), Pinot Gris (+31%) and Grenache (+20%).
By David BECK
Director at WINE ANALYTICS
Excerpt from APAC WINE MARKETS REPORT.