Australian wine industry faces high stock levels amid steady sales, production cut

Image credit: Wine Australia's LinkedIn

Despite a challenging year marked by the lowest wine production in 15 years, the Australian wine industry continues to face pressure from historically high national wine inventory levels, as revealed in Wine Australia’s Wine Production, Sales, and Inventory Report 2023.

The report indicates that total sales of Australian wine in 2022–23 were 11 per cent higher than production, with sales reaching 1.07 billion litres.

This represents a noteworthy accomplishment given the global challenges impacting various markets, but the modest progress in reducing inventory levels, resulting from a four per cent decrease to an estimated 2.2 billion litres on June 30, 2023, remains limited.

Australian wine production hit a low of 964 million litres, the lowest since 2006–07 and the first time in 15 years that it fell below 1 billion litres.

While domestic sales saw a slight increase, exports experienced a similar-sized decline, contributing to the challenging market conditions.

Wine Australia Manager, Market Insights Peter Bailey acknowledged the positive aspect of steady sales amid global challenges, highlighting that it is the first time in five years that total sales volume has remained stable on a year-on-year basis.

“Sales of Australian wine have been decreasing in our domestic market and in export markets over the past five years, due to declining wine consumption combined with increased cost-of-living pressures and the effects of the significant duties on Australian wine to China,” he explained.

While the reduction in national wine inventory is a move in the right direction, particularly for red wine stocks that decreased by 10 per cent, the report noted that challenges persist.

The national stock-to-sales ratio for reds remains 45 per cent above the 10-year average at 2.57, reflecting the pressure on winery inventories and the impact on demand and prices for wine grapes.

According to the report, the situation is comparatively better for white wine, with a stock-to-sales ratio of 1.49, closer to its long-term average of 1.35.

However, the industry faces the challenge of rebalancing supply and demand, with sales of white wine in 2022–23 at 463 million litres, considerably lower than the 10-year average production of 579 million litres.

Bailey underscored that the Australian wine industry’s struggle to rebalance supply and demand is not unique, echoing a global trend where world wine production has consistently exceeded consumption for the past decade.

“This prolonged oversupply, which is the equivalent each year of more than twice Australia’s production, has put increasing pressure on all wine-producing countries,” he stated.

The industry looks towards finding sustainable solutions to navigate these challenging market dynamics in the coming years.