Australian winemakers and growers have expressed cautious optimism following China's announcement of a five-month review into existing tariffs on Australian wine exports.
The industry sees this move as a positive first step but does not view it as a 'silver bullet' solution. Currently, exports have dwindled to as low as A$10 million per year from more than A$1 billion before the tariffs were imposed in November 2020.
In response, Australia has suspended its action against China in the World Trade Organization.
Kirsty Balnaves, president of South Australia's Wine Industry Association, highlighted the significant impact of tariffs.
"We went from exporting around $1.3 billion worth of wine into China to now just over $10 million," she told the ABC.
"So that gives you some enormity about how much these tariffs have impacted not only our industry but also regional communities.
"I think five months is fine. We've been out of the market for three years, so if we can get the right result in five months I think that's a really positive thing."
The impact of the tariffs has been far-reaching.
Growers like those represented by CCW Co-Operative have lost 80% of their revenue since the tariffs took effect.
Furthermore, the review period coincides with a critical time for growers, as Ruth Ellis from Hanging Rock Winery in central Victoria points out, necessitating a strategic decision on whether to hedge bets on the lifting of tariffs.
“If they're looking at lifting restrictions in March and April, many wineries are going to have to hedge their bets as to whether or not tariffs will be lifted," Ellis told the ABC.
"The biggest hit in this whole thing has been for the grape growers. Bottled wine can last between five to 100 years, but once grapes are ripe, they have only weeks.
"There's a lot of really full wineries that are still at capacity, so it will be challenging to see what this is going to mean for them and whether their grapes will be taken or not."
In New South Wales, Andrew Calabria, president of the Riverina Winemakers Association, remains cautiously optimistic but notes that re-entry into the Chinese market won't necessarily restore the A$1.2 billion in value previously enjoyed, especially as competitors from other nations have gained market share.
Treasury Wines welcomes announcement
Treasury Wine Estates Ltd retained experienced and strong sales and marketing leadership in China during the tariff period.
It also introduced the first Chinese-sourced and produced luxury Penfolds wine.
However, it will still look to rebuild its footprint in the region which, like others in a similar position, was impacted.
If tariffs are removed TWE plans to rebuild its business in China over time in the following way:
- continuing TWE’s existing multi-country of origin portfolio growth strategy, led by Penfolds’ French, US and Chinese portfolios.
- re-building distribution for the Penfolds Australian entry-level luxury portfolios in China– including Penfolds Max’s, Koonunga Hill and One by Penfolds.
- reallocating a portion of Penfolds Luxury and Icon tiers from other global markets to progressively re-build distribution in China while maintaining strong momentum of growth in those other markets.
- re-building distribution for the Treasury Premium Brands Australian priority portfolios in China including Rawson’s Retreat.
The company noted its rebuild in China would not be at the expense of growth in other markets.
“It’s great to see an agreement for an expedited pathway forward to allow our Australian brands and wine to be sold in the Chinese market. There are only positives to come out of a favourable review for the Chinese consumer, customers and the wine category, for the Australian wine industry and for TWE,” TWE CEO Tim Ford said.
“Both governments have worked constructively to achieve this outcome and we now look forward to a new era of positive engagement that ultimately will build a strong and growing China wine category should the review see the removal of these tariffs.”