China has lifted hefty tariffs on Australian wine, as announced by its Ministry of Commerce.
The decision ends three years of punitive taxes that have inflicted severe damage on certain winemaking regions in Australia.
After months of speculation, it was suggested in a November review that the anti-dumping and anti-subsidy tariffs might be lifted, indicating a reduction in trade tensions between the two nations.
Earlier this month, Treasury Wine Estates announced that they had received an interim draft of proposals, fueling rumors that a change was imminent.
The owner of the Penfolds brand welcomed the news and laid out its intentions to promptly resume operations in China.
Tim Ford, our CEO, stated, “The removal of tariffs on Australian wine exports to China is wonderful news and a reason for celebration across the Australian wine industry, as well as among our partners and customers in China.”
“It demonstrates the ongoing stabilisation of relationship between both countries and the longstanding partnerships upheld between Australian businesses and our Chinese counterparts.”
Treasury’s strategy involves reinstating distribution channels for Penfolds’ entry-level Australian portfolio, which includes brands such as Penfold’s Max’s, Koonunga Hill, and One by Penfolds.
Addressing analysts after the company’s financial year 2023 results last August, Ford mentioned that “prudent” shipping flexibility had been incorporated into the second half of FY24 in anticipation of potential changes in Beijing.
The company will now redirect a portion of its Penfolds Bin and Icon wines from other countries and reinstate distribution for its “Australian-sourced priority portfolio” in China. This portfolio includes Rawson’s Retreat, a brand that was reportedly rebranded as a South African wine due to the tariffs.
In 2022, the prominent winemaker expanded the ‘multi-regionality’ of its Penfolds flagship brand by introducing a version sourced from China, thereby circumventing the trade barriers.
Treasury stated that despite the imposition of tariffs, it has upheld its dedication to the Chinese market. This commitment is demonstrated through the retention of a robust and experienced onshore team comprising over 120 individuals, sustained efforts to cultivate strong industry and customer relationships, ongoing investments in brand promotion, and the introduction and expansion of a multi-origin portfolio.
Valued at over AUD1bn (US$690m) annually at its highest point, the abrupt loss of the Chinese export market in late 2020 left some winemakers with full tanks during the harvest season.
In Wine Australia’s recent export report, released in February, the increasing shipments to Hong Kong stood out as a positive note in an otherwise challenging data set. While Australia’s total value and volume declined by 2% and 3% respectively, Hong Kong experienced a significant growth with a 74% increase in value and a 28% rise in volume.
Meanwhile, some businesses have been more hesitant about a swift return to trading.
Mark Lewis, the proprietor of Cape Landing in Margaret River, had said, “Once bitten, twice shy,” at the Wine Australia trade tasting held in London earlier this year. “I think that the key lesson for Australia is not to overly rely on the Chinese market, as its unpredictability has been showed.”
When the five-month review was announced last year, Sean Cunial, regional managing director for Asia at Accolade Wines, expressed optimism, stating, “I am hopeful about the opportunities for our business, the suppliers we collaborate with across Australia, and the industry as a whole, considering the historical demand for Australian wine among Chinese consumers.”
However, he added, “We are aware that the Chinese market has experienced significant shifts since the tariffs were imposed, with growing competition from wines of other countries.”
Giles Cooke MW, managing director of Alliance Wine, commented that the news was welcome “considering the broader challenges of oversupply and challenging market conditions.” He also mentioned that he had already observed tentative interest from Chinese importers.
However, he added, “Much has changed since the tariffs were implemented, and the relationship between Australian wine businesses and China will undoubtedly be more cautious in the future.”
“Mature, sensible business practices will be highly appreciated, but Australia should not lose sight of focusing on the long-term sustainability of its wine industry,” he remarked.
“One of the results of this focus is undoubtedly the decrease in the overall grape crush, the establishment of solid foundations for the market, and an increased emphasis on obtaining genuine, long-term premiums for the quality of its finest wines,” he noted.
