The news that China has finally removed its punishing tariffs on Australian wine will naturally be welcomed by a wine industry currently sitting on huge volumes of unsold stock. While few if any producers imagine they are instantly going to rebuild the dominant market share they enjoyed before the application of the tariffs, some in Australia hope that Chinese wine drinkers will help to reduce their surplus.
They may be disappointed. Sun Jian, head of Changyu, the largest and most successful Chinese producer and owner of Kilikanoon Wines in Australia, told Meininger’s International that the wine market in his country is flat or falling and set to remain that way through 2025. As Meininger’s reported, domestic demand between 2022 and 2021 fell by 16%, with imports dropping by 21%. Consumption in 2022 was estimated at 8.8m hl – just over half the figure in 2012 when the Chinese wine boom was at its peak. The long pandemic lockdown had a dramatic impact on restaurants and bars– still the places where most wine is consumed.
Another factor of specific concern are the amounts of unsold Australian wine currently sitting in Chinese warehouses. This ageing stock is expected to hit the streets at low prices – and is not expected to do much to help Australia’s quality image.
Competitive market
China-watchers also note that, within the diminished market, Chile, Australia, South Africa and France have all moved in to claim the space vacated by the Australians. Chinese wine drinkers who were enjoying South Australian Shiraz or Cabernet are now happily consuming often similarly-packaged bottles from all of those other countries.
Whether wine drinking – ‘western’ behaviour – will continue to suffer from the move towards Chinese nationalism is another important question for all would-be exporters to China. Wine companies, however, have the additional challenge of competition from the giant producers of China’s most popular form of alcohol – baijiu spirit. These highly profitable companies operate with far higher margins and, while some have dabbled in wine production and imports, generally few see much appeal in the more limited money to be made from fermented grape juice. The close relationship the baijiu companies have with the Beijing government is unlikely to be helpful to overseas companies hoping to convert their customers to foreign wine.
Australian wineries will be wise to limit the efforts they devote to China, and to put more of them into opening new markets elsewhere.
