Penfolds spearheading China wine push after tariffs axed

A premium South Australian wine label is leading a renewed push in the Chinese market after crippling duties were abolished.

Australia’s largest wine producer, Treasury, will use iconic South Australian brand Penfolds to spearhead its re-entry into the Chinese market after a long-awaited decision to scrap crippling tariffs.

China was SA’s largest wine export market, valued at almost $1bn, before tariffs were imposed in 2020, and their highly anticipated removal from Thursday night has been hailed as a momentous milestone for the industry.

Treasury Wine Estates chief executive officer Tim Ford said a detailed plan to regain a Chinese market foothold would start immediately, which would include re-establishing distribution for Penfolds entry-level Australian-produced wine, including Koonunga Hill and Penfolds Max’s and One by Penfolds.

Other premium and luxury Penfolds labels from other global markets would be reallocated to progressively rebuild distribution to China.

Treasury Wine Estates chief executive officer Tim Ford at the Hubert Estate in the Yarra Valley. Picture: Aaron Francis / The Australian

Australian consumers are expected to be largely unaffected by China’s confirmation that tariffs on Australian wine imports would be reduced to nil, effective immediately.

Most wine companies have plenty of inventory to satisfy domestic and export demand, including China, so prices are expected to remain stable for the next few years.

“The removal of tariffs on Australian wine exports to China is terrific news and is cause for celebration across the Australian wine industry and with our partners and consumers in China,” Mr Ford said.

“We’re excited to bring more of our Australian luxury and premium wines back to the China market but we’re mindful it will take time to sustainably regrow both supply and demand.

“We’ll also maintain the strong momentum of growth in key global markets where Penfolds has successfully grown its business in recent years.”

SA Wine Industry Association president Kirsty Balnaves. Picture: supplied

SA Wine Industry Association president Kirsty Balnaves said the Chinese wine market had changed since tariffs were imposed – competition was much stronger than before and consumers had more choice at various price points.

“In addition, alcohol consumption has declined, and opportunities for consumption, such as events, have reduced,” she said.

South Australian wine exporters will need to visit the market to assess the market opportunity, create awareness, provide education, and reintroduce their wines to consumers – this will take time.

“However, Chinese consumers remain familiar with South Australian wine, as many of our wine producers have visited the market numerous times prior to 2020, and more recent trips have highlighted the strong positive sentiment and deep impression SA wine has made on the Chinese consumer.

“This positive sentiment stems from the premium quality of South Australian wine, our commitment to sustainable production, and connection with our South Australian wine story.”