European wine imports

In a recent blog post (Global wine exports) I chastised the Australian wine industry for principally exporting large amounts of cheap wine, rather than exporting high-quality wine, which they do actually make as well. The latter pays better in the long run, as shown by the leading export countries, such as France and New Zealand. In this post, I look at this same phenomenon at a smaller scale: the European Union.

The data cover the years 2012–2014, and come from:
EU-27: Wine Annual Report and Statistics 2015. United States Department of Agriculture, Foreign Agricultural Service. Global Agricultural Information Network Report No. IT1512.

The graphs show the average cost per litre of wine imported from various countries. The first graph refers to imports into the European Union as a whole.

This shows 10 of the top 11 sources of imported wine, excluding Switzerland. Both Israel and Switzerland export very little wine to the European Union, but they make considerably more money per litre out of it than does anyone else (for Switzerland it is $55–85 per litre!).

The big sources of wine for the European Union are, in decreasing order of volume, Chile, Australia, South Africa and the United States. As shown in the graph, these countries make considerably less money per litre out of their exports than do some of the other countries, notably New Zealand, Georgia and Argentina. In other words, they are purveyors principally of cheap wine.

We can look at somewhat finer detail by considering individual countries within the European Union. Two of the biggest destinations for the imported wine are Germany and the United Kingdom. Indeed, these are the two biggest wine importers by volume in the world (see the post Global wine imports).

The graph for Germany shows that the countries making most money per litre for their wine exports are from the European Union itself (France, Austria and Italy). Of the outsiders, the USA makes considerably more money per litre than does Australia, which makes no more money than does Chile.

The New Zealanders do not appear in the Germany graph because most of their wine goes to the United Kingdom. Indeed, as shown in the next graph, they also make much more money per litre from this wine than does anyone except the French. Australia and Italy are the two biggest suppliers by volume to the UK, and yet they are principally supplying cheap wine, unlike France and New Zealand. [The 2015 data come from GAIN report United Kingdom Wine Market Report 2016.]

These figures do not shine a healthy light on the Australian wine industry, as I noted previously. There is money to be made by exporting wine, and yet the Australians are not making much of it, in spite of being globally the fifth biggest exporter (with the UK, USA and China as the biggest markets). Exporting cheap wine, rather than better-paying wines, is not a route to financial advancement.

As Max Allen (Australia at the crossroads?) has noted:

The volume of annual wine exports is roughly the same, 670 million litres, as it was a decade ago (after reaching a high of 768 million in 2007) but the value of those exports has dropped by a staggering A$1 billion, fostering a persistent image overseas of Australia as a commodity producer of cheap plonk.

Part of this issue, of course, is the matter of bulk wine, which is bottled in the destination country rather than at the source — this reduces the added value in the country of origin. As Jancis Robinson has pointed out (How wine travels nowadays – in bulk):

In 2008 fewer than three in every 10 bottles of Australian wine on British shelves contained wine that had been shipped from Australia in bulk rather than in bottle. Four years later that figure was eight in every 10, and the total amount of wine shipped out of Australia in bulk overtook the volume exported in bottle.

The Australian wine industry is frequently reported to be in a state of crisis (see, for example Anatomy of wine profit and (mainly) loss: South Africa versus Australia). This is principally due to an over-supply of grapes of mediocre quality (principally from the irrigated vineyards of the Murray-Darling basin), along with a very centralized production and distribution system (focused on two supermarket chains) that is interested in quantity rather than quality. Indeed, in 2013 John Angove noted that Australia is well overpopulated with wineries, as it has one winery for every 8,800 population, compared to the USA figure of one winery for every 55,000 population.

Viv Thomson noted earlier this year:

It was the mid-90s when the Winemakers Federation of Australia put out a forecast for the next 30 years. By 2010 we were well ahead on plantings, but we weren’t ahead on infrastructure, we weren’t ahead on marketing and that brought about the current glut and disaster. Then the high Australian dollar really put the crunch on things ... it got out of hand, the investors got involved, grape prices were sky high ... it was just not sustainable.

Australia has an abundance of high-quality wines, but they currently seem uninterested in letting the world see many of them. They might solve a few of the reported problems if they tried to earn more export dollars per litre than they currently do.