What is the outlook for Australian wine exports to China now tariffs are removed?

We cannot think of a food & beverage category that was more effective in driving the right kind of growth in China than Australian wine brands and its industry representative, Wine Australia.

In 2010, China’s relatively small wine industry was dominated by French wine. France was the origin of around half of all wine imported into China, largely driven by the prestige and popularity of Bordeaux wines. Australia accounted for around 16% of imports.

On the back of wines that were very agreeable with the Chinese palate – from wine newbies to connoisseurs – the Australian wine industry did a remarkable job at introducing Australian wines to the Chinese drinker. This came at a time when many were first discovering the joys of imported wines.

Wine Australia led various marketing programs to educate Chinese consumers and trade partners about the diversity and quality of Australian wines. This included tasting events, sommelier training programs, and master classes featuring top Australian winemakers. Annual awards, roadshows such as Australian Wine Made Our Way, partnerships and collaborations, and research and insights which led to localised initiatives such as the China-specific Tasting Notes, all helped to get more Chinese drinking and gifting Australian wines. 

The industry’s initiatives saw Australia sell more wine to China than France in October 2017, a lead it had cemented by 2019 when it accounted for 35% of imports ahead of France’s 29%. Australia didn’t get there by flooding the market with cheap plonk on the back of a favourable Free Trade Agreement. Helped by the popularity of Penfolds, Australian wine commanded a higher premium than French wines in China, and more than double the average price of Australian wines globally.

After such a text book success, it was devastating to see the good work cancelled when China introduced tariffs on Australian wines of up to 218.4% in November 2020.

That is why, like many, we were thrilled to learn of the removal of the tariffs last Friday.  

Whilst the resumption of free trade of Australian wines is great news, it won’t be a silver bullet to clear Australia’s surplus wine – the equivalent of 859 Olympic swimming pools of wine, more than two billion litres, overnight.

Companies such as Treasury Wine Estates have maintained a presence on the ground, helped by diversifying its wine sources to China and other countries. Similarly, some state governments have implemented smart initiatives to keep a supply of Australian wines on tables in China. But the majority of Australian wine brands have much work to do rebuilding trade and consumer relationships and relevance.

Like most categories, China’s wine market has shifted a lot since 2020. The foreign and domestic wine brands who filled the void left by Australia will be contesting harder than ever for a market that has contracted and is less free-spending than the 2010s. A more confident Chinese wine drinker has put its own unique stamp on how it consumes wine, as many of the trends illustrate. Much of the good work Wine Australia, state and federal governments and individual brands did will take time and fresh strategies to rebuild.

Although rock lobster and the eight Queensland abattoirs remain barred, the return of a popular and high profile category such as Australian wine is symbolic that Beijing is again endorsing Australian products. This sends a positive message to both Chinese consumers and trade that Australia is very much back on the menu, which will spill over to other Australian products and services such as tourism and education.

Australian wine brands have their work cut out for them to reach their former heights. The market is much more nuanced and competitive than it was a decade ago, but they have done it before, and there are plenty of reasons why they can do it again.