Page 13 - Food & Drink Magazine Jan-Feb 21

WINE EXPORT UPDATE
need to sell? How much resource in terms of time, travel and other marketing support can they invest in order to deliver these sales? How many relationships with different importers in different markets can they sustain?
The key thing to remember is that Asia is a massive patchwork of entirely different markets, with different profiles, different levels of maturity, different cultural expectations and different levels of tax and political risk. Anyone adopting a ‘one size fits all’ approach to Asian markets will fail unless of course the demand for their wines is off the charts.
Unless China quickly returns to the table, this is a major reset for Australian wine. I think it’s only a matter of time before there’s a glut of low-priced and low-quality wine on our domestic market. Smart brand owners will look to take a strategic, medium-term approach towards a carefully chosen selection of Asian markets. I anticipate considerable interest in more mature markets such as Korea, Japan and Singapore, plus potential upside in Vietnam, Thailand and even India.
There’s no silver bullet for wineries faced with large volumes of what was made and packaged as China- bound wine. However, with a considered, smart and medium-term attitude to engagement with other Asian markets, it’s indeed possible to build a more diverse and potentially more reliable future. ✷
✷ ABOUTTHEAUTHOR
✷ TARIFF RUNDOWN
A DEVASTATING BLOW
been told by importers in Korea recently that they have been asked to sell Australian wine with China-focused label designs and even sporting back labels in Chinese.
China aside, there are indeed significant opportunities for Australian wine brand owners across Asia’s diverse wine markets. Of course, none represent the size and richness of the China opportunity, but mostAustralianwinebrand owners only focus on a fraction of the China market in any case.
Before exploring the ‘new’ Asia opportunity, Australian wine brand owners need to ask themselves what success looks like. How much wine at what price points do they
At the end of November 2020, provisional tariffs imposed by China on Australian wine imports will all but collapse the Chinese market for Australian wine.
Initial charges of 107.1 to 212 per cent on wine in containers of two litres were imposed by the Ministry of Commerce (MOC) from 27 November. A further 6.3-6.4 per cent was imposed on 16 December. The amount due to customers authorities will vary from company to company, MOC said.
Under Chinese anti-dumping regulations, the provisional anti-dumping measure cannot exceed four months (28 March 2021), but under special circumstances it may be extended to nine months
(28 August 2021). The timing
is dependent on China deciding if the measures should be maintained, adjusted, or removed.
Federal Trade Minister Simon Birmingham said the decision was “grossly unfair, unwarranted, unjustified”.
He wouldn’t rule out recourse through the World Trade Organisation, saying the sanctions were, “completely incompatible with the commitments that China has given through the China- Australia Free Trade Agreement and through the World Trade Organisation. It’s incompatible with a rules- based trading system.”
“The motivations really are ones for China. But I can understand well and truly why people would draw the conclusions and how the perception has been created that this is a deliberate strategy, piling on pressure in a number of different sectors, it would seem. And that’s of deep concern. It’s of deep concern to many Australian businesses
Treasury Wine Estates is the most impacted by the China tariffs, with the market worth
30 per cent of its group earnings.
and their operations,” Birmingham said.
Domestic sales of Chinese produced wine have fallen in recent years, from 75 per cent market share in 2015, to 50 per cent in 2019. Meanwhile, Australian wine exports to China grew from $268 million in 2015-16 to $1.75 billion
in 2018-19.
The company hardest hit by
the decision is Treasury Wine Estates (TWE). In FY20, China represented around two-thirds of TWE’s total Asia region earnings, and 30 per cent of group earnings. In terms of its share of Australia’s total wine exports to China, TWE accounts for around 40 per cent of the annual $1.3 billion market. IBISWorld senior industry analyst Matthew Reeves said: “The Australian wine production industry generated revenue of $7 billion in 2019-20. China is the dominant market for Australian wines, accounting for 36.7 per cent of export revenue last year.”
Jeremy Oliver is a
co-founder and partner of
Asia Wine Hub (www. asiawinehub.com) a
platform designed to
inform, advise and support Australian wine brands in the Asian region.
www.foodanddrinkbusiness.com.au | January/February 2021 | Food&Drink business | 13