This article originally appeared in the December 2017 edition of Grapegrower & Winemaker.
Opportunities abound for bulk wine exporters due to surging Chinese demand and 2017’s global supply slump. But, local producers have been warned to watch the quality of their wine, and to get back to promoting themselves on the world stage. Hans Mick reports.
Producers of bulk wine from Australia and New Zealand joined suppliers from more than 20 other countries for the 9th World Bulk Wine Exhibition (WBWE) in Amsterdam in November.
Hosted by the Dutch city for the eighth straight year, the exhibition featured 220 international exhibitors, with more than 6000 attendees taking part in the two-day event, including all-important bulk wine buyers.
The event is aimed at providing a meeting place on “neutral ground” for bulk wine suppliers and purchasers from around the world, with wineries, distilleries, importers, distributors, retailers, and representatives from international supply chains also taking part.
Organisers say the 2017 exhibition has taken place in a year of ‘special importance’ for the whole international sector, due to low wine grape harvests worldwide. They say for this reason it’s been a ‘crucial’ event for many international wine businesses.
“The WBWE is an essential fair for those producers who would like to broaden their market, search for better wine prices or find new profitable niches,” said said Otilia Romero de Condés, the exhibiton’s general director.
“[It’s] also a unique opportunity to be able to present their wines in front of professionals from the sector from 65 different countries.”
“Between 70 and 80% of the bulk wine that is exported can be found at this trade fair,” she said.
Preferred choice for Chinese buyers
At the previous WBWE in 2016, the importance of the event to Australian suppliers became clear with the country emerging as the preferred choice for Chinese buyers. This resulted in subsequent exports to China totalling 415 million L of bulk wine over the last year.
Australia’s development in the bulk wine trade has been growing consistently over the last 16 years, when it barely counted for 12.5%, compared to 85% for packaged wine. In 2016, bulk wine went to 54.5% compared to 44% for packaged wine.
While Greater China (including Hong Kong and Macau) is leading as Australia’s biggest importer of wine overall, most of the $600+ million generated in export sales in 2016-17 has been for bottled product, with a surge in demand for premium wines.
In the bulk wine stakes, China still has to make up ground as a destination for Australian exports compared to other traditional markets. The United Kingdom remains the number one destination for Australian wine exports by volume, followed by the United States and Canada. China comes in at fourth place tied with the Netherlands. New Zealand, Italy, Germany and Belgium are also major destinations for Australian exports.
There’s a general surge in demand for bulk wine from China, with the ‘massive’ growth partly attributed to changing consumer preferences and purchasing channels.
However, Chinese bulk wine purchases represented a dramatic turnaround on the previous year, with an increase of 129% up to more than 26 million L, and an increase of 154% in terms of value.
And with the total dollar value of bulk wine shipped to China growing faster than the volume, China is now Australia’s third largest customer, behind the UK and US in value terms.
According to the London-based bulk wine trading exchange, VINEX, there’s a general surge in demand for bulk wine from China, with the ‘massive’ growth partly attributed to changing consumer preferences and purchasing channels.
Though bottled wines still dominate the Chinese market, as prices for bottled wines continue to rise, companies are increasingly turning to bulk wines, where they can bottle for bigger profits.
Dubbed ‘one euro wines’, these can be legally imported in bulk and then bottled in China with the companies’ own label.
Spain remains China’s most important source of bulk wine with approx. 52.45 million L (worth around US$39 million) shipped from January to September this year. The next largest bulk wine exporters to China are Chile, Australia, France, South Africa, Italy, the US and Portugal.
At the recent 2017 Amsterdam expo, some of China’s largest buying companies attended to secure wine supplies. These included the country’s leading buyer, Cofco, as well as Ninecoast (the 8th largest), and their presence presented an opportunity for Australasian producers to showcase their wines and to develop or solidify important business connections.
“Wines from Australia and New Zealand are always extremely welcomed at the fair, but if there is one relevant purchaser for Australia and New Zealand at the moment it is China,” said Romero de Condés.
“Australia during the last World Bulk Wine Exhibition became the object of Chinese buyers’ desire [in the past year] accounting for 54.5% of its total foreign sales,”
“This year, both powers again participated prominently in the world’s largest fair for the wine business.
“Australia during the last World Bulk Wine Exhibition became the object of Chinese buyers’ desire [in the past year] accounting for 54.5% of its total foreign sales, amounting to 281 million euros, at an average price of 0.68 euros per litre,” she said.
De Condés said bulk wine trends in both Australia and New Zealand have been followed closely so that event organisers were able to strategically match these to the needs of the Chinese buyers.
An important meeting point
The Australian participants at this year’s WBWE included Growers Wine Group and Kingston Estate (from the Riverland), LCW – Limestone Coast Wines (from SA’s Padthaway region), Winegrapes Australia (from McLaren Vale), Qualia Wines (from Victoria’s Sunraysia), and Austwine and South Australian Wine Group (both based in Adelaide).
Bill Moularadellis, managing director of Kingston Estate Wines, said the Riverland company has been travelling to take part in the bulk wine event for at least five years.
“Amsterdam has been an important meeting point with buyers and sellers of bulk wine,” said Moularadellis.
“It’s a really good opportunity to efficiently meet with all our customers and to engage with potential new customers. It’s very valuable.”
Moularadellis said the event allows exporters to discuss trends in the market, to plan accordingly and to ‘get a feel’ for the changing needs of customers.
“We’ve had great success over the years. Business continues to grow,” he said.
And while Moularadellis said Germany’s ProWein International Trade Fair for Wines and Spirits held in Düsseldorf, is the primary global event for Australian exporters generally, the WBWE adds another important meeting time to focus purely on the bulk wine trade.
NZ wine in front of new customers
A number of New Zealand producers also took part in the Amsterdam event to present their best wines on offer. These were Groco Ltd (the company name of the Gisborne Wine Growers Cooperative), Marlborough Grape Producers Cooperative (MGPC), New Zealand Wineries (which has wineries in both Marlborough and Waipara) and Wine Brokers NZ (based in Marlborough).
“Shows such as the WBWE are important to get product in front of potential new customers,” said Craig Howard, Marlborough Grape Producers Cooperative general manager.
“We are now moving wine into several new markets as a result and [we’ve headed] back for 2017 to see if we can do it again.”
“The Cooperative attended the 2016 event and came away with a lot of contacts. The good news is that some of them liked our business model and saw value in working with a Marlborough Sauvignon Blanc producer to make wine specific to their consumer.
“We are now moving wine into several new markets as a result and [we’ve headed] back for 2017 to see if we can do it again.”
Howard said the 2017 edition of the WBWE was being used by the Marlborough cooperative to emphasise the difference it offers, to owners of buyers-own-brand labels.
“The way the Marlborough Grape Producers Cooperative uses the opportunity maybe a little different to the rest of the NZ producers.
“Traditionally a NZ wine company will take the best wine for its own brands and then if they have anything left, sell the remainder on the bulk market. We don’t work this was way,” he explained.
“The Cooperative doesn’t own any brands and at this stage we don’t want to. Our focus is on producing quality 100% Marlborough Sauvignon Blanc for buyers-own-brand programs.
“Once we find a buyer who wants to work with us, we select vineyards and wine styles to fit the palate of what their consumer wants and then make the wine accordingly.
“This gives the buyer a true ‘gate-to- glass’ experience and gives us a point of difference in what is sometimes a crowded market,” he said.
Howard was accompanied to the Amsterdam trade show by coop winemaker Drew Ellis, and a range of sub-regional wines that showcased the different styles of Marlborough Sauvignon Blanc on offer to potential buyers.
“Drew also packed a bag of tricks that let us bench-blend wines onsite, [for] buyers want[ing] to see other options,” said Howard.
Global supply slump – an opportunity?
There has been speculation that Australian wine producers, stand to benefit from this year’s slump in global supply brought about by poor harvests in several large powerhouse supplier nations.
New Zealand, heavily weighted to exports of Sauvignon Blanc, is less affected by the more widespread shortages.
According to Wine Australia, world wine production in 2017 is expected to be 24.6 billion litres, down by two billion litres, or eight per cent, on last year’s numbers.
The International Organisation of Vine and Wine (OIV) reported that there were falls in the three top producing countries – Italy, France and Spain – which recorded historic low harvests due to frost, heat, drought and hail.
Compounding supply issues, Chile and Argentina have come off the back of a poor vintage in 2016, which had already squeezed supply from both countries.
The latest quarterly report from Rabobank signals that the world’s ‘smallest harvest in decades’ will keep bulk wine prices rising with shifts in demand “inevitable”.
“The global bulk wine supply is now reduced and for the first time ever it looks like global supply will now meet consumer demand globally,”
Australia is the only major wine producing country to record an above average harvest in 2017.
“The global bulk wine supply is now reduced and for the first time ever it looks like global supply will now meet consumer demand globally,” said Denys Hornabrook, managing director of the VINEX trading exchange.
“Generally one or two countries may have a difficult vintage but when you’ve got three of the biggest countries in the world which represent 50% of all wine supply having a less than average yield, and you also have one or two other countries that are either average or slightly below average, then it starts to compound,” Hornabrook said.
“Australia was fortunate in 2017 to have its largest harvest for nearly 10 years. It’s come at a time when the world’s supply from other areas is reducing, so that on the face of it represents an opportunity for Australia,” he said.
“Australian wine it is sitting on the cusp of a great opportunity.”
But Hornabrook issued a warning to Australian producers over what he said could be a potentially damaging quality issue.
“Australian wine in our view needs to be careful. ‘17 was a big vintage but some of the wine quality we’re seeing coming through and being offered through VINEX, the trading exchange, is disappointing in quality terms.
“It seems that every grape was picked. There were no grapes left on the vine, no grapes were dropped onto the ground, there were rising grape prices so every grapegrower and wine producer went to extraordinary lengths to capture every piece of fruit they could and make wine out of that.
“I think there is definitely evidence that there is colour degradation or lack of colour, and there is a lack of body weight in the wines. Now this doesn’t hold Australia in good stead. It has to be very, very careful here because it has built over many years a great reputation for its wine.”
And Hornabrook said there’s also a very real threat emerging from substitute supplies coming from new and developing producers.
“Right now there are wines coming onto the VINEX trading exchange from multiple countries in Eastern Europe that run rings around Australian wine, in terms of colour, in terms of varietal intensity and structure and price.
“Two weeks ago there were 900,000 L of Pinot Noir from Kosovo traded into Switzerland. It was a very good Pinot. It was entry level, but really good colour, good varietal intensity.
“And while we don’t necessarily want to compete right at the bargain basement level, nevertheless we have some real competition,” he said.
Australia has ‘lost ground’
With the World Bulk Wine Exhibition over for another year, VINEX’s Hornabrook has further warned that Australian wine has lost ground to its competitors on the world stage and he offers a simple solution.
“Australia needs to get back on aircraft, Australian producers need to get back to being pioneers of opening up new markets and new customer relationships.
“We’ve seen this through the big international trade fairs that happen through the year, when attending those, the Australian attendance has been poor,”
He said the WET tax designed to support cellar doors, grow tourism and support small to medium-sized producers, has had the effect of “making Australian producers in the main quite lazy.”
“We’ve seen this through the big international trade fairs that happen through the year, when attending those, the Australian attendance has been poor,” he said.
“Frankly, at ProWein […] it’s easier to find and interact with a producer from Bulgaria than it is from Australia. That’s the reality. And that’s disappointing. That was not the case 15 years ago.
“There need to be a lot more Australian producers who seize these opportunities. And what better time to do that than when Australia ostensibly has supply and our competitors don’t. There is a lot of opportunity right now.”
The next opportunity for bulk wine producers will be at the next WBWE which is scheduled again for Amsterdam, in November 2018.