China will lift hefty tariffs on Australian wine from tomorrow (29 March), its ministry of commerce said today.
The move ends three years of punitive taxes which have devastated some of Australia’s winemaking regions.
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It follows months of speculation anti-dumping and anti-subsidy tariffs would be lifted, after a review announced in November suggested trade tensions were easing between the two nations.
Earlier this month, Treasury Wine Estates said it had seen an interim draft of proposals, sparking rumours change was close.
The Penfolds brand owner today welcomed the news and outlined its plans to reenter China immediately.
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CEO Tim Ford said: “The removal of tariffs on Australian wine exports to China is terrific news and is cause for celebration across the Australian wine industry and with our partners and consumers in China.
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By GlobalData“It’s testament to the continued stabilising of relations between both countries by the respective governments and the ongoing partnerships maintained between Australian businesses and our Chinese counterparts.”
Treasury’s plans include reestablishing distribution for Penfolds entry-level Australian portfolio, which encompasses brands like Penfold’s Max’s, Koonunga Hill and One by Penfolds.
Speaking to analysts following the company’s financial year 2023 results last August, Ford said “prudent” shipping flexibility had been built into the second half of FY24 in lieu of potential movement in Beijing.
It will now reallocate a portion of its Penfolds Bin and Icon wines from other countries and reestablish distribution for its “Australian-sourced priority portfolio” in China, which includes Rawson’s Retreat – a brand which was reportedly re-branded as a South African wine following the tariffs.
In 2022, the winemaking giant extended the ‘multi-regionality’ of its Penfolds flagship brand with a China-sourced version – which would bypass the trade barriers.
Treasury said since the tariffs were imposed it had “maintained a commitment” to the Chinese market “through the retention of 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 portfolio”.
Caution in Australia’s wine trade
Worth over AUD1bn (US$690m) annually at its peak, the sudden cut to the Chinese export market in late 2020 left some winemakers with full tanks while harvests were underway.
In Wine Australia’s latest export report, published in February, rising shipments to Hong Kong were a bright point on an otherwise cloudy data set – Australia’s total value and volume dropped by 2% and 3% respectively while Hong Kong saw 74% value growth and 28% volume growth.
Meanwhile, some businesses have been more cautious about an immediate return to trade.
“Once bitten, twice shy,” Mark Lewis, founder of Cape Landing in Margaret River, told Just Drinks at the Wine Australia trade tasting in London earlier this year. “I think the big lesson for Australia is don’t have your eggs too tied up in the Chinese egg market because they’ve shown they can be unpredictable.”
When the five-month review was announced last year, Sean Cunial, regional managing director for Asia at Accolade Wines, told Just Drinks he was “optimistic about the possibilities for our business, the suppliers we work with around Australia, and the industry more broadly given historic demand for Australian wine among Chinese consumers”.
However, he added: “We know the Chinese market has undergone significant change since the introduction of the tariffs, with increased competition from wines from other nations.”
Giles Cooke MW, managing director of Alliance Wine, said the news was welcome “given the wider issues of over supply and tough market conditions” and said he had already seen tentative interest from Chinese importers.
But he added: “A lot has changed since the tariffs came into effect and the relationship between Australian wine businesses and China will be an awful lot more circumspect in the future.
“Mature, sensible business will be very welcome but it shouldn’t detract from Australia focussing on the overall sustainability of its wine industry for the long term.
“One of the outcomes of that focus is surely the reduction in the overall crush and foundations being placed underneath the market, along with increased attention paid to getting real, long term premiums for the quality of its wines from its best wines.”
