One year on, and China’s tariffs on Australian wine imports have wiped almost a billion dollars from the trade, with the industry bracing for more pain heading into the 2022 vintage.
- Wine exports to mainland China have dropped from 121 million litres to 10 million litres
- The pandemic, storms and a global shipping crisis have made developing new markets difficult
- The UK is now Australia’s largest market by volume and value
This time last year, The Lane Wine Company in the Adelaide Hills was exporting more than 20,000 bottles of wine a year to China.
Now it doesn’t export anything there.
Chief executive Jared Stringer said anti-dumping duties had gradually squeezed the life out of Australia’s wine exports to China.
“All of that wine going to China had to end up somewhere, and my biggest concern was and still is that it would end up in the domestic market and thus flooding it and lowering the price,” Mr Stringer said.
At its peak, the Chinese wine trade was worth $1.26 billion a year to Australia and made up 41 per cent of the overall value of Australian wine exports globally.
In the last 12 months the trade has fallen off a cliff and is now worth just $82 million thanks to duties of between 116.2 per cent and 218.4 per cent.
The premium red wines have felt the brunt of the tariffs as 96 per cent of the export to China were red wine.
The domestic market has picked up some of the homeless wine, but market diversification has been the main strategy to turn the fortunes around.
The federal government has provided a $50 million support package for exports and regional wine, but the pandemic as well as tight container availability and a global shipping crisis has made developing new markets difficult.
Mr Stringer said the pandemic had supercharged sales from the direct-to-consumer market, helping reduce the shortfall.
“We’ve had a more than 60 per cent increase in direct-to-consumer, which is enormous for us,” he said.
The United Kingdom has emerged as the largest market by volume and value for Australian wine and one The Lane has targeted.
Mr Stringer said they have seen some good gains in the UK, but it is a very different market.
“So, we’re having to educate the UK consumers a little bit more that they can buy some premium Australian wines. But if you think about some of the discounted wine they’ve been buying through their big supermarkets, it is a bit of a re-education process.
“There are multiple markets, but it’s tough though with COVID because you can’t get overseas and you can’t shake hands and introduce yourself and get them tasting your wines.”
Wine Australia’s export figures show the drop in wine sold to China has not been covered by other buyers.
Exports to new or expanding markets have only increased by 10 per cent in value to $1.99 billion and decreased by 6 per cent in volume, to 610 million litres.
Wine Australia’s general manager of corporate affairs Rachel Triggs sees some promising signs, particularly in South-East Asia.
“Hong Kong for example in the last 12 months is up 120 per cent to $206 million, Singapore’s up 89 per cent to $164 million,” she said.
“South Korea has been a really strong market in the last 12 months up 84 per cent to $46 million and both Thailand and Taiwan have both experienced growth of about 50 per cent.”
Ms Triggs said it was difficult to say how much of an effect the demise of the Chinese market had on the overall bottom line for Australia’s wine industry.
“We know going into the 2021 vintage inventory levels were at an all-time low, so supply was an issue.”
Headwinds for grape producers
South Australian Wine Industry Association chief executive Brian Smedley agrees the changing trading conditions as well as difficulties with shipping, the pandemic and the weather means there are significant headwinds heading into the 2022 vintage.
“For China we know that the market has basically collapsed. So, for bottled wine it means that for the last year it’s been progressively ending and for many producers they are looking for alternative varieties,” Mr Smedley said.
“We also know that the pricing has come off for red grapes in particular, given that China was a red-grape market.
“We’re looking at alternative markets, but those alternative markets will take a long time to come on and won’t necessarily replace the value or the volume of China.”
The World Trade Organization will form a panel to investigate the dumping allegations, but it will be some time before it will make any findings.
China also importing less wine
Prior to the imposition of tariffs, Australia was exporting the greatest volume of wine to China, accounting for 25 per cent of the imported wine market.
However, Wine Australia figures showed wine and other alcoholic beverage consumption was already on a downward trend.
Wine imports from Australia declined by 88 million litres in the 12 months to September, with only 55 million litres picked up through increased imports from other countries.
“I think that could be attributed to the fact that people are actually drinking more Chinese wine; they do have a significant amount of vineyards in China,” Ms Triggs said.
The main countries to capitalise on Australia’s gap in the market are Chile and Spain, whose wine imports come at a much lower average price.