Treasury Wine Estates Optimistic About Lifting of Chinese Tariffs

Following our report last week of China’s decision to lift its punitive tariffs on Australian barley, and suggestions that Australia’s prime minister, Anthony Albanese might visit Beijing before the end of the year, Treasury Wine Estates is betting on an imminent removal of the wine tariffs too.

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Penfold's sales have been defected by the the tariffs (Photo: TWE)
Penfold's sales have been defected by the the tariffs (Photo: TWE)

Announcing the company’s 2023 results, TWE’s chief executive, Tim Ford announced that “We’re going to plan to ship more in the second half in totality, just to give us the flexibility should the situation change with China over the next four or five months … It’s about giving ourselves the flexibility about how we allocate over the course of the full year.”

While sales of the Australia giant’s Penfolds wines have – like all Australian imports – been devastatingly affected by the tariffs, the company has maintained its presence in the market and attracted interest by launching a made-in-China wine last year.

China not to blame

Australian producers hoping that a reopening of the Chinese market will being instant relief to the surplus of grapes on their vines and wine in their cellars are likely to be disappointed, however.  Chinese consumption of both imported and domestically produced wine has halved in recent years, and Australia’s place in the market has been taken by France, Chile and South Africa.

Also, as Dudley Brown reported in Meininger’s in May, the Chinese tariffs were only responsible for 19% of the Australian oversupply through June 2022, while large harvests in 2020 and 2021 principally accounted for the other 81% of inventories.

Insights Wine

Australian wineries have huge volumes of unsold wine. Most media coverage blames China’s swingeing punitive tariffs for this situation. But, as Dudley Brown reveals, Beijing’s responsibility for the situation is quite limited.

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