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- Starting this weekend, Australian wines exported to China will double, or even triple, in price due to new import tariffs.
- This could boost sales of South African wines, which currently account for only 1% of Chinese imports.
- South African exporters have been left behind due to the country’s lack of exposure in supermarkets and an e-commerce platform, says one exporter.
- For more articles, go towww.BusinessInsider.co.za.
China has imposed import tariffs of between 107% and 212% on Australian wines since this weekend, as part of a tense – and growing – trade war between the countries.
In recent months, China also banned the exports of some Australian meat facilities, launched a crackdown on coal imports from that country and imposed an 80% tariff on Australian barley.
China says the barley and wine tariffs are anti-dumping measures, but commentators believe it has more to do with Australia’s request for an investigation into China’s handling of the coronavirus pandemic, as well as its decision to exclude Huawei from the development of Australia’s 5G network. . Diplomatic tensions between the countries have been on the rise in recent months.
This could have profound implications for South African exporters, particularly of wine.
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Currently, only one percent of Chinese wine imports are from South Africa, according to Wines of South Africa (WOSA), a non-profit industry organization that promotes wine exports.
This was initially due to French exporters consolidating their position in the Chinese market over the past two decades, and also because South African producers have not yet established strong relationships with Chinese wine importers, says Philip Retief, CEO of Van Loveren Vineyards, which exports some of its produce to China.
Also, South African wines have a price disadvantage. Australia, New Zealand and Chile have free trade agreements in place with China, which meant that in the past, their wines had no import tariffs of around 17%.
“So from the start, South African wines are 17% more expensive and we are struggling to compete,” says Retief, noting the irony, given that South Africa and China are part of the Brics group aimed at fostering closer economic ties.
He believes the massive new import tariffs on Australian wines offer a great opportunity for South African winemakers. WOSA’s Maryna Strachan agrees, but says Chile and New Zealand, thanks to their free trade agreements with China, will likely be the main beneficiaries.
“Still, even if we take 1% of Australia’s market share, we will double our sales,” a wine exporter told Business Insider SA.
Some 52 million people in China drink imported wine, which is almost double the number just seven years ago, according to the Wine Australia industry association. China is the world’s fifth-largest wine importer, and last year Australia overtook France to become the largest wine exporter to China. Almost 40% of all Australian export wines go to China.
The wine exporter believes that South African Shiraz exporters in particular have the opportunity to gain a large market share from Australian producers.
“Our challenge is not to sell too cheap. For me, the opportunities will be to bring home our unique Chenin and Pinotage outlets, take back the Shiraz business, and push hard on our white wine advantage. No wine-producing country can compete with the quality, value and variety that SA can offer, ”he said.
Strachan says that WOSA is already answering more inquiries from importers in China who are looking to develop their South African wine offering in the country.
“There is a growing cohort in the wine community that understands the exceptional quality and value for money available at all prices for South African wine.”
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The key beneficiaries will be South African wineries that have already invested time, energy and resources in China, says Strachan. “(Local producers) who work with importers who have large portfolios, including Australian wines, should see immediate benefits as their Australian brands become extremely difficult to sell.”
Retief says that a surprisingly large part of South Africa’s wine exports are done through Chinese nationals living in South Africa and exporting to contacts in their home country. South African wine has little exposure in Chinese supermarkets or through large e-commerce platforms such as Alibaba and JD.com.
He believes that local wine exports can grow exponentially if the right channels are developed and that the new Australian import tariffs can be a turning point.
But Strachan cautions that there will be no immediate payoff for local wine exporters.
“2020 has been a very difficult year for the wine industry in China, with a decrease in total imports of around 35%. This indicates that there is still a significant volume of unsold wine, (which) will likely take several more months and peak Chinese New Year sales. [in February] level the playing field.
“It is a long game that can only come to fruition in five to ten years,” agreed the wine exporter. “But we are already seeing the transition.”
– Compiled by Helena Wasserman
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