The federal government has welcomed China’s decision to remove the heavy tariffs it imposed on the Australian wine industry in November 2020. In its 28 March announcement, the Chinese Ministry of Commerce said the situation in China’s wine market had changed so the “anti-dumping and anti-subsidy tariff” was no longer necessary.
The government said the decision came at a critical time for the Australian wine industry and thanked grape growers and wine producers for “their fortitude and support during a challenging period”.
China’s impost on the wine industry at the end of 2020 followed sanctions on seafood, sugar, coal, copper, timber and barley, as the relationship between the two countries floundered.
The tariffs ranged from 116.2-212 per cent on wine in containers of two litres or less. It saw an export market worth $1.7 billion collapse to $4 million in 12 months.
Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) figures show that in 2020, the top five export markets for Australian wine were Canada, China, Hong Kong, the UK, and US. They accounted for 77 per cent of export revenue with China was the largest in value terms, accounting for 33 per cent of export revenue.
In bottled wines, China was Australia’s largest market in value (40 per cent) and second largest in volume (24 per cent).
The demand for Australian bottled wine in China came with the staged removal of import tariffs starting in 2015 and completing at the start of 2019, as part of the China-Australia Free Trade Agreement. The lack of tariffs gave Australia a 14 per cent advantage over its competitors and saw its market share of bottle wine imports increase nine per cent to 37 per cent in one year.
When China announced the tariffs at the end of 2020, Chinese produced wine had fallen from 75 per cent market share in 2015 to 50 per cent in 2019, while Australian wine exports to China grew from $268 million in 2015-16 to $1.75 billion in 2018-19.
The impact of the tariffs was immediate. Wine Australia found that exports to mainland China fell from $173 million in December 2019 to $4 million in December 2020. “The number of exporters fell from 832 to 48. Bottled exports fell from $166 million to $3 million and unpackaged exports from $7 million to $300,000. For bottled exports, all price points declined but the biggest fall in absolute value terms came at $10 or more per litre, down from $117 million to $2.4 million,” it said.
For Treasury Wine Estates, which was impacted heavily by the tariffs, said it had retained “a strong and experienced onshore team of over 120 people, continued focus on building deep industry and customer relationships, ongoing investment in brand building and the introduction and expansion of the multi country of origin (COO) portfolio, including the first Chinese sourced and produced Luxury wines for Penfolds”.
It launched One by Penfolds in China in 2022, and in July 2023 released the Chinese Winemaking Trial (CWT) 521, TWE’s first China-sourced wine in the 2023 Penfolds Collection, which was available in limited quantities for $150.
At the time, TWE CEO Tim Ford said the company saw a “bright future” for China as a premium and luxury winemaking region.
In 2022, TWE had established a strategic agreement with China’s peak alcohol body, China Alcoholic Drinks Association, to advance China’s wine industry on the global stage through technical knowledge and expertise exchange, as well as wine education and culture programs.
Ford said the financial contribution of re-establishing the company’s Australian COO in China would be minimal for the rest of FY24, and that until expanded Bin and Icon availability from the 2024 vintage was available for release – not expected until FY27 – incremental growth would be “modest”.
But the company outlined four goals:
- Re-establishing distribution for Penfolds entry-level Australian COO portfolio, including Penfold’s Max’s, Koonunga Hill and One by Penfolds;
- re-allocating a portion of Penfolds Bin and Icon tiers from other global markets in order to progressively re-build distribution to China, while maintaining the strong momentum in those other markets where Penfolds has successfully grown in recent years;
- re-establishing distribution for the Treasury Premium Brands Australian sourced priority portfolio in China, including Rawson’s Retreat; and
- expanding sales and marketing resources, and brand investment, in China.
Ford said, “Our commitment to China has been resolute, and we now look forward to partnering with our local customers to re-establish our Australian COO portfolio in the market while continuing to be a meaningful contributor to the development and growth of the Chinese wine industry.
“This is a medium-term growth opportunity that we will pursue in a deliberate and sustainable manner, focused on growing our portfolio in China while continuing the strong momentum that we have delivered in several global markets over recent years.”
Wine Australia CEO, Dr Martin Cole, said mainland China had remained an important market for the Australian wine sector and that the close relationships between Australian wine companies and importers, buyers and Chinese consumers were strong.
“Pleasingly, we know that trade and consumer sentiment for Australian wine in China remains positive,” Cole said.
But he warned the market was not the same. “The wine market in mainland China is different now to what it was at the end of 2020. Wineries seeking information to re-enter the market are encouraged to review the Export Market Guide, market insights, and sign up for information about upcoming activities at wineaustralia.com.
“We will support the Australian wine sector to re-enter the market through a coordinated set of activities and advice on market requirements, while continuing our market diversification efforts in other markets,” Cole said.
Accolade Wines CEO, Robert Foye, said, “While we do not anticipate a snapback to 2020 levels, we do see a sizeable opportunity for our business in China and we are excited about the long-term potential this market brings.
“I was in China last week meeting with our key customers and distributors including at the Food & Drinks Fair in Chengdu and I can say there is genuine excitement about bringing Accolade’s portfolio of exceptional Australian wines back to the Chinese consumer.
“We know that Australian wine has a well-deserved reputation for quality in China, and that includes a number of our leading brands such as Hardys and Grant Burge, and we look forward to building on this now that the tariffs have been lifted.”
Wine Australia: Data on the wine market in mainland China
Australian wine exports to mainland China peaked at $1.3 billion and 121 million litres in the 12 months ended October 2020.
Since the introduction of the duties on Australian wine, exports to the market have fallen to 1.4 million litres valued at $10.1 million in the 12 months ended December 2023.
The number of exporters to the market has also decreased from 2198 to 117 over the same period. (Source: Wine Australia)
In 2022, almost 90 per cent of imported wine drinkers in mainland China said they would be happy to recommend wines from Australia or proud to serve wines from Australia. (Source: Wine Intelligence)
In 2022, imported wine consumers in mainland China rated the quality of Australian wine very highly, scoring it 8.49 out of 10 (Source: Wine Intelligence).
Australian wine was the number one imported wine category in mainland China with a third of the market value in 2020. Since the imposition of the duties, no other country’s wine imports have replaced the volume of wine that Australia exported to mainland China. (Source: IWSR)
According to official import statistics from Trade Data Monitor, total wine imports to China have fallen from 688 million litres in 2018 to 248 million litres in 2023 – a third of what it was five years ago. (Source: Trade Data Monitor)
In the past 12 months, the total volume and value of wine imported by China continued to decline. The Chinese economy has slowed, and consumer confidence is low. (Source: Trade Data Monitor)
The top four countries for wine imports to mainland China of France, Chile, Italy, and Spain all recorded significant declines in their exports to mainland China in the 12 months ended December 2023. In 2023, the volume of wine imports from France fell by 29 per cent, Chile by 18 per cent, Italy by 31 per cent, and Spain by 48 per cent. (Source: Trade Data Monitor).
