Rivals poised to pounce as Australian winemakers consider exit from China

As Australian winemakers rethink their future in the lucrative Chinese market, hit by painful tariffs as relations between the two countries deteriorate, rival producers around the world are poised to pounce.

Canberra and Beijing have been locked in a diplomatic and economic deadlock for most of this year, with China tackling a list of issues, including Australia’s call for an investigation into the origins of Covid-19 and the ban on Huawei’s participation in the country.

The dispute has seen at least 13 Australian sectors hit by import levies, including beef, coal and barley – but one of the hardest hit is wine, with the sector hit by two waves of tariffs customs in November and December.

The effect has been to double, or even triple in some cases, the price of a bottle of Australian wine in Chinese supermarkets.

This is a blow to the winegrowers – China is their largest market, accounting for over a third of their exports and until recently where they were the dominant players.

But as Australian wine has become less appetizing in China, new openings have appeared for domestic producers and other wine-exporting countries.

By imposing anti-dumping duties, which represent up to 212 percent of the value of the goods, China has claimed that cheap Australian imports are damaging its own wine industry.

Domestic production in the first half of the year was $ 680 million, while imports were $ 830 million.

Today, some observers believe Chinese vineyards are poised to benefit after a few dark years.

“Local producers have suffered from extreme weather events over the past three years, as well as increased imports, especially from Australia,” said Matthew Reeves, senior industry analyst at the study group of IBISWorld market.

– High quality demand –
But the big winners will likely be other established wine-producing countries, Reeves added, as “the local wine industry in China will not be able to meet the demand for high-quality wine.”

Chilean wines “seem more likely to fill the void in the medium term,” said Tommy Keeling, research director of the International Wine and Spirits Record (IWSR) for the Asia-Pacific region.

China already drinks more Chilean than any other exporting country – and good diplomatic relations could also work in Santiago’s favor, according to Jorge Matthei, an import consultant.

The Chinese market has been a lifeline for Chilean producers hit hard by the pandemic, he said, adding that orders from that country had increased by more than a third in the past six months.

And Chile is not alone in feeling an opportunity to reverse Australia’s market leadership, previously helped by an import duty exemption in 2019.

In the first half of the year, for every 100 bottles of wine imported into China, 38 were Australian. Of the rest, 26 were French, 13 Chileans, seven Italians and six Spaniards.

Reeves believes that all of these countries will now see their share increase.

Even US producers – battered by the trade war with China which saw 2019 sales nearly halved – might also be able to take advantage of any potential resets under the Joe Biden administration, he added. .

Mariano Larrain, owner of a specialized Chilean wine merchant in Shanghai, is more cautious about the future of the market.

“I don’t really believe that Chilean wines are going to replace Australian wine, because they are not really in the same range,” he told AFP.

The French Federation of Wine and Spirits Exporters has also issued a warning.

“It is difficult to know how the Chinese market will develop.”