Following China announcing it will review the tariffs it imposed on Australian wine, Treasury Wine Estates (TWE) has revealed its plans for rebuilding exports.
China announced in March 2021 that it would apply duties of up to 218.4% on most Australian wine exporters, following allegations of dumping of Australian wines in China.
The decision saw trade worth $898 million in 2020 plummet to just $8.1 million in the year to June 2023.
TWE said in a statement that it welcomed the announcement from the Australian Government that China will conduct a review into Australian wine tariffs.
CEO Tim Ford said: “It’s great news to see an agreement for a path 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 tariff review for the Chinese consumer, customers and wine category, for the Australian wine industry and for TWE.
“Both governments have worked constructively to achieve this outcome and we now look forward to a new era of positive engagement that will ultimately build a strong and growing China wine category should the review see the removal of these tariffs.”
TWE told the ASX it plans to rebuild its business in China include, but are not limited to the following:
- 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 TWE 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.
- Incremental sourcing for Penfolds Luxury and Icon tiers to meet existing and future
- demand, noting that the age of release of these wines will be between three and five years.
- Investment in further sales and marketing resources within China to re-build the distribution footprint of Penfolds.
- TWE will continue to apply its globally standardised margin structure to Penfolds sales globally, to ensure long-term brand health and price integrity. The company said this would ensure that sales prices and margins from luxury wine are materially consistent in all markets.
Prime Minister heads to China
Prime Minister Anthony Albanese said in a statement: “We have now reached an agreement with China to move forward to resolve this dispute. We welcome China’s agreement to undertake an expedited review of its duties. This process is expected to take five months.
“Australia and China have agreed we will suspend the dispute on wine in the WTO pending the outcome of this review. If the duties are not removed at the end of the review, Australia will resume the dispute in the WTO. We are confident of a successful outcome.”
The Prime Minister will travel to the People’s Republic of China from 4-7 November 2023. It will be the first bilateral trip by an Australian prime minister to China since 2016.
In Beijing, the Prime Minister will meet with President Xi Jinping and Premier Li Qiang. In Shanghai, the Prime Minister has accepted Premier Li’s invitation to attend the China International Import Expo.
“I look forward to visiting China, an important step towards ensuring a stable and productive relationship.”
“I look forward to further engaging with President Xi and Premier Li in Australia’s national interest.”
“Prime Minister Whitlam’s historic visit laid the groundwork for the diplomatic, economic and cultural ties that continue to benefit our countries today.”
“I welcome the progress we have made to return Australian products, including Australian wine, to the Chinese market. Strong trade benefits both countries.”
Australian Grape & Wine welcomes review
Australian Grape & Wine CEO Lee McLean said he welcomed the announcement that China has agreed to expedite a review of its wine import duties.
“This is another very positive step towards the removal of import duties on wine that would see the resumption of Australian wine exports to China,” said McLean.
“It has been a very difficult time for Australia’s grape growers and wine producers in recent years following the loss of China as our major trading partner, the global pandemic and various weather events, so this is very welcome news for grape growers and winemakers across the country.
“The review process by the Chinese Government is expected to take five months and Australian Grape & Wine will engage in and support that process in any way we can. We understand Australia will suspend the wine dispute in the World Trade Organisation pending the outcome of this review.
Australian Grape & Wine President John Hart OAM and McLean visited Shanghai last week and met with the Chinese Alcoholic Drinks Association to discuss common objectives and significant opportunities for the two industries to collaborate in the future.
“The re-engagement with China at the political, government officials and industry-to-industry levels has enabled the positive dialogue that has led to this decision ,” said Mr McLean. “We have said from the beginning that dialogue between the parties would be critical to resolving this dispute, and we have taken a major step towards this today.”
“Australian Grape & Wine has worked closely with the Australian Government and the Department of Foreign Affairs and Trade over recent years to foster a mutually beneficial solution that advances the interests both Australia and China. We acknowledge the work of ministers and officials in rebalancing the relationship with China, facilitating the resumption of trade in commodities such as coal, timber, barley and hay.
“China holds a pivotal position in the global wine market for Australia. Before the imposition of import duties, the value of Australian wine exports to China was $1.2 billion. Regardless of the outcome, we remain committed to diversifying our market presence and cultivating opportunities in markets across the world.”