Australian winemakers seek exit from China

Other wine exporting countries such as Chile and France could see their market share increase. Image: STR – AFP

With Australia’s winemakers rethinking their future in the lucrative Chinese market, hit with painful tariffs as relations between the two countries deteriorate, rival producers from around the world are ready to jump.

Canberra and Beijing have been locked in a diplomatic and economic showdown for most of this year, with China attacking a list of issues including Australia’s call for an investigation into the origins of COVID-19 and a ban on the involvement of Huawei in the country.

The dispute has seen at least 13 Australian sectors hit with import taxes, including beef, charcoal and barley, but one of the worst hit is wine, and the industry was hit by two waves of tariffs in November and dicember.

The effect has been to double, and in some cases even triple, the price of a bottle of Australian wine in Chinese supermarkets.

It’s a blow to winemakers: China is their largest market, accounting for more than a third of their exports and, until recently, it was the dominant player.

But as Australian wine has become less palatable in China, new opportunities have emerged for domestic producers and other wine-exporting countries.

By imposing anti-dumping duties, which amount to as much as 212% of the value of products, China claimed that cheap Australian imports were damaging its own wine industry.

National production in the first half of the year was $ 680 million (about P32.6 billion), while imports reached $ 830 million (P39.8 billion).

Now, some observers believe that Chinese vineyards are about to benefit after a few bleak years.

“Local growers have suffered extreme weather events for much of the last three years, as well as increased imports, especially from Australia,” said Matthew Reeves, senior industry analyst at market research group IBISWorld.

High quality demand

But the big winners will likely be other established wine-producing countries, Reeves added, because “the local wine industry in China will not be able to meet the demand for high-quality wine.”

Chilean wines “seem more likely to fill the gap in the medium term,” said Tommy Keeling, International Wine and Spirits Record (IWSR) Director of Research for Asia Pacific.

China already drinks more from Chile than any other exporting country, and good diplomatic relations could also count in Santiago’s favor, according to Jorge Matthei, an import consultant.

The Chinese market has been a lifeline for Chilean producers affected by the pandemic, he said, adding that orders from there had increased by more than a third in the past six months.

And Chile is not the only one feeling an opportunity to reverse Australia’s market leadership, previously helped by a 2019 import tariff waiver.

In the first half of the year, out of every 100 bottles of wine imported into China, 38 were Australian. Of the rest, 26 were French, 13 Chileans, seven Italians and six Spanish.

Reeves believes that all of these countries will now see their participation increase.

Even American producers, hit by the trade war with China that saw 2019 sales there almost halved, could also take advantage of any potential restart under Joe Biden, he added.

Mariano Larraín, owner of a store specializing in Chilean wines in Shanghai, is more cautious about the future of the market.

“I really don’t think Chilean wines are going to be a substitute for Australian wine, because they are not really in the same range,” he told AFP.

The French Federation of Wine and Spirits Exporters also made a note of caution.

“It is difficult to know how the Chinese market is going to evolve.” DC

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