Australian winemakers are re-evaluating their business plans as the China export crisis deepens.
Tony Battaglene, chief executive of industry group Australian Grape and Wine, told Bloomberg that product set for export is down by as much as 60%, while about 40% of Australian wine exports would typically be shipped in the final four months of the year.
“This is the peak export period,” Battaglene said, adding that it’s “not good at all.”
The China export situation is keeping Royal Star Wine owner Alex Xu awake at night. The Sydney exporter sells his own brands of wine from vineyards located in South Australia’s Coonawarra, McLaren Vale and Barossa wine regions – about 80% of his clients are in China.
“This is a very serious matter because we don’t know how long we’ll be banned,” Chinese-born Australian Xu told the South China Morning Post. “Every night I’m still thinking about ‘what should I do tomorrow?’”
Royal Star Wine has had six or seven orders from China cancelled, which has cost Wu $200,000-$300,000.
The orders not cancelled are being delayed at customs in China, Xu said. He currently has two containers, holding about 14,000 bottles of wine each, waiting on ships to clear customs in China.
Tahbilk winery Chief Executive Alister Purbrick is looking to India as a potential new market. In the meantime, higher wine club and bottle shop sales have saved his bottom line.
“We are certainly grateful to our wine club members for them thinking of us and buying a lot of wine that they drank at home,” he told The Australian.
Purbrick said sales through Tahbilk’s subscription wine club were up 65% between April and October.
Latest accounts for Tahbilk lodged with the corporate regulator show revenue for 2020 rose to $13.8million from $12.74milion, as profit almost doubled to $1.4million.
“Regarding the situation in China, he said: “There is not much we can do; obviously shipments have stopped. We had four (containers) in the water when the announcement was made, shipments have stopped and I think that would be widespread. No one is going to take the chance until they see some of this wine being released at the port and this would give us confidence the crisis is over.”
Seeking alternative markets
Today the South Australian Wine Industry Association announced a new Emerging Markets Program to help wine producers diversify into emerging Asian markets.
Chief executive Brian Smedley told InDaily: “This is simply a reminder that there are other markets that are within close proximity to Australia that might be opportunities.”
Japan is Australia’s eighth-largest export market while Malaysia, India and South Korea are all currently outside the top 10.
“We’re aiming to equip wine businesses with the tools and opportunities they need to enter these emerging markets, which will assist with business sustainability during this COVID-19 recovery phase,” Smedley said.