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Rabobank Q3 Wine Quarterly: “Swimming in wine” – navigating oversupply in Australia’s wine industry

Even early removal of Chinese anti-dumping tariffs would not be enough to prevent Australia’s wine industry facing several years of oversupply, Rabobank says in its newly-released Wine Quarterly Q3 2023 report.

Improving trade relations between the two countries and the recent removal of Chinese tariffs on Australian barley has led to optimism that five-year tariffs placed on Australian wine in March 2021 may be removed early.

However, the Rabobank report says, even in a “best case scenario”, with tariffs removed this year and Chinese consumption of Australian wine recovering quickly, this would “not be a panacea” with Australia’s wine industry still facing at least two years to work through its current wine surplus.

While this isn’t good news for Australian wine makers, there is an upside for consumers, says report author RaboResearch associate analyst Pia Piggott, with the oversupply keeping prices of many quality Australian red wines at reduced levels.

So large is the current oversupply, says Ms Piggott, that Australia has the equivalent of 859 olympic swimming pools worth of wine in storage.

Rabobank Associate Analyst Pia Piggott Rabobank Associate Analyst Pia Piggott

“That’s over two billion litres of wine, or over 2.8 billion bottles of the wine,” she said.

The Rabobank report says Chinese anti-dumping tariffs placed on Australian wine had led to significant disruptions for Australia’s wine industry, with Australia’s value of exports decreasing 33 per cent over the past two years.

Ms Piggott said with the tariffs coinciding with significant growth in Australian production and logistics bottlenecks from COVID, the Australian wine industry is now dealing with inventory oversupply which is depressing prices – particularly for commercial red varieties.

Strategic considerations

The Rabobank report said the Australian wine market will remain in oversupply for a considerable length of time. “To return to balance and profitability, acreage needs to be reduced, thus over the next five years we will see rationalisation of assets throughout the supply chain,” it said.

Ms Piggott said for vineyards, margin pressure from both ends will remain high for some time, particularly for uncontracted vineyards with a high mix of red varieties.

“For wineries, particularly those selling commercial wine, stocks will remain high for some time as businesses slowly work through selling inventory. While some brands have increased bulk shipments and been able to heavily discount stock, this will need to continue for some time to rebalance the market,” she said.

And for large retailers/investors with diverse income streams, the current market provides ample buying opportunities as distressed vineyard/winery assets come up for sale, Ms Piggott said. “Through this we can expect increased consolidation of vineyards and wineries as businesses invest to expand their distribution.”

Implications for New Zealand

Ms Piggott said the Chinese tariffs on Australian wine which have been in place since early 2021 have had little direct impact on New Zealand wine export sales into China.

“While China is a key market for many other agricultural exports from New Zealand, it’s only a small market for New Zealand wine, with this largely down to China’s preference for red wine varieties which only make up a minor per centage of New Zealand’s overall production.” she said.

Ms Piggott said Australia was a much more significant market for New Zealand wine – it’s third largest export market overall – and the expected oversupply of Australian wine was a potential threat for the competitiveness of New Zealand wine exports traveling across the Tasman.

“Sales of New Zealand wine into Australia have grown strongly over the last 12 months,” she said.

“But inflation for wine in Australia remains quite low at present due to the grape surplus, and we do expect this surplus will make further increases in the value of NZ wine sales into Australia more challenging over the years ahead.”

Despite this, Ms Piggott said the immediate outlook for New Zealand wine exports remains positive.

“In the year to May 2023, we’ve seen total export sales of New Zealand wine grow by 26 per cent – largely off the back off strong sales growth into the US which now makes up more than a third of New Zealand wine export sales overall.” she said.

“And a key factor in this US market growth is the trend towards lighter-styled, premium wines which lines up nicely with the types of wines being produced in New Zealand.”

Ms Piggott said the New Zealand vintage for 2023 was close to 500,000 tonnes and slightly back on the record production volume recorded in 2022.

“Sauvignon Blanc was again the dominant variety – at close to 80 per cent of total NZ production – with the next largest production volumes coming from Pinot Noir, Pinot Gris and Chardonnay.” she said.


Download the full report here



Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customized banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of more than nine million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 27 offices throughout New Zealand.

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Rabobank New Zealand
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Denise Shaw
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Rabobank Australia & New Zealand 
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