Wine Quarterly Q3 2023: Navigating Oversupply in the Australian Wine Market
Chinese anti-dumping tariffs placed on Australian wine in March 2021 have led to significant disruptions to Australia’s wine industry, with Australia’s value of exports decreasing 33% over the past two years.
After significant growth in domestic production coincided with logistics bottlenecks from Covid-19, the Australian wine industry was left to deal with an inventory oversupply, which is depressing prices for commercial red varieties.
Over two years into the five-year tariff, improving relationships between the countries have sparked discussions on an early tariff removal, though this is not expected to be a panacea for the Australian wine industry.
In our base-case scenario, it will likely take the industry four years to reduce oversupply, but even in an optimistic scenario where the tariff is removed and Chinese consumption recovers quickly, it will still take the industry two years to work through surplus wine.
Heightened offtake risk and margin pressure will force production slowdown and industry consolidation as the market rebalances.
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Pia PiggottAnalyst – Associate Analyst Read more