[ad_1]
Photographer: James Bugg / Bloomberg
Photographer: James Bugg / Bloomberg
To gain a fresh perspective on the stories that are important to Australian business and politics, Subscribe to our weekly newsletter.
China’s assault on Australia’s wine industry is turning into quite a stir.
The latest round of tariffs, which could boost Import duties exceeding 215% in total have left Australia’s winemakers reeling. Over the past 25 years, China, with its growing middle class and appetite for fresh Shiraz, Cabernet Sauvignon and other great reds, has become Australia’s biggest and most enthusiastic customer. Australia overtook France as the top exporter to the country by value in 2019; Last year, China spent A $ 1.2 billion ($ 904 million) on imports, about 40% of Australia’s total shipments, according to Wine Australia.
“They love our style and they know our flavors,” said Mitchell Taylor, whose Taylors Wines, based in Clare Valley in South Australia, derive a fifth of their annual export revenue from China. “They have a very perceptive palate, so wine has been a natural area to explore and enjoy.”
Expensive taste
Australia mainly exports premium wine to China
Source: Wine Australia, Bloomberg calculations
Those buyers are disappearing fast. Rumors of upcoming tariffs pushed China’s purchases up 94% in October, according to China customs data; Australian winemakers benefited from a corresponding 40% increase in prices. Official November data is not yet available, but the measures are expected to be an effective death sentence, eliminating demand and driving prices down.
Now the Australian industry, still reeling from the wildfires that burned vineyards in early 2020 and the coronavirus epidemic that hampered demand, is rethinking all its global distribution plans. Melbourne Stocks Treasury Wine Estates, better known for its Penfolds brand, fell as much as 12% after the first rate announcements.
Emergency plan
The umbrella group, owner of 19 Crimes, affiliated with Wolf Blass and Snoop Dogg, among others, announced a The emergency plan would include reassigning its Penfolds Bin and Icon labels to other luxury markets and accelerating the push to produce more wine in other countries to avoid Australian-made tariffs.
Chinese demand for Penfolds will persist at some level, Treasury chief executive Tim Ford said in an investor call on Nov. 30, reiterating a “long-term commitment” to the market. “We are very disappointed to find our business, our partners’ business and the Australian wine industry in this position.”
The next biggest customers from Australia, the US and the UK, probably won’t offer much comfort. With the luxury market cornered by California and Europe respectively, Australia has become better known for bargain brands like Yellow Tail. “We will really need to sell the luxury history of Australian wine,” Taylor said.
Almost two-thirds of Australia’s exports to China were priced at AU $ 10 per liter or more, according to Wine Australia, while the growth in exports to the UK and the US was primarily due to the AU $ 5 segment .
New market
Breaking into a new market, particularly one with existing preferences, doesn’t happen quickly. Winemakers spend years courting and educating distributors, retailers and sommeliers on new flavor profiles and the particularities of the terroir. The tone is different, too, Taylor said. The usual gifts and lavish dinners worked in China, while Americans seek out wine journalists and global competitions, along with widespread publicity and promotion.
“We all have to see how we are going to reposition ourselves and re-engage in other markets where we may have shortened them,” said Alister Purbrick, CEO of Tahbilk Wines in downtown Victoria. For now, he is doubling down on the domestic market, but sees opportunities in another emerging market: India. So far, tariffs have kept most exporters at bay, but he sees long-term potential in shifting consumer preferences and the emergence of a younger, more global generation.
“U.S sensation that that wine market would develop in a similar way to that of China, ”Purbrick said, adding that his company is better positioned to weather the storm than smaller exporters. “However you look at it, there will be some pain,” he said. “Our good friends in China have really pulled the rope on the guillotine.”
Meanwhile, Chinese importers and retailers will look elsewhere. A Guangdong wine merchant who gave his last name as Ni said he raised Australian wine prices and plans to start importing from other countries, including France, Chile and Argentina.
Business with China had the potential to double “for the foreseeable future,” according to Taylor. “China was always the engine of our numbers,” he said. “We know that winemakers from France, Chile and New Zealand are cheering.”
– With the help of Shuping Niu
