According to a Bloomberg article published yesterday, the value of wine sales to China rose 7% in the last 12 months to $1.2 billion as demand for Aussie wines continues to soar.
So while sales are increasing to our biggest trade partner, could this open the door for Treasury Wine Estates Ltd (ASX: TWE) to increase revenues and send its share price soaring?
What did the Bloomberg article say?
According to the article, data from Wine Australia showed that the value of Australian wine exports to China rose to a new high, increasing 7% to $1.2 billion for the 12 months to 30 June 2019.
However, the overall volumes to China fell 16% as demand for cheaper varieties declined, in line with a broader global trend, and demand for premium Aussie labels increased.
Bloomberg reported that Australian labels grew in popularity on United States (US) wine lists, with export values rising 2% to $423 million while the value of Aussie exports to the United Kingdom (UK) fell 3% to $373 million.
China remains by far our biggest export market for wine, followed by the US, UK, Canada and New Zealand.
The Wine Australia data reported by Bloomberg showed that the total value of Australian wine exports grew by 4% to $2.86 billion, well short of last year's 20% increase.
Overall export volumes fell 6% during the year while it was the $100–$200 per bottle premium range that grew 102% as the fastest-growing category, while the $50–$100 per bottle price bracket declined by 17%.
What does this mean for Treasury Wine Estates?
Given the Aussie winemaker has many premium labels within its range, there is a chance we could see this higher Chinese demand flow through to its results in the August reporting season.
A strong earnings result would be a good boost for the Treasury Wine Estate share price, with the company's share price underperforming the S&P/ASX 200 (INDEXASX: XJO) index as the Aussie market enjoyed its best start to the year since 1991.
The Treasury Wine Estate share price is up 11% for the year, which amounts to just under half of the ASX 200's 20.4% gain since the beginning of January.
