China was once a billion dollar market for Australian wine, now it is a market the same size as Sweden

China, once a goldmine for Australian winemakers worth more than $1bn a year, has been crushed to become just a tiddler $25m market.

Australian wine once dominated the China market and was highly sought after by Chinese drinkers, but trade wars and tariffs have seen Australian wine exports to China collapse 96 per cent in two years.

The mainland Chinese market, once a goldmine for Australian winemakers as local drinkers filled their glasses and banquet tables with more than $1bn a year in Australian wine, has been crushed to become just a tiddler $25m market following years of political tensions and punishing trade tariffs.

Year on year exports to China last financial year have collapsed by nearly 96 per cent to $24.6m – ranking it about the same size in terms of Australian wine consumed as Sweden and only slightly more than the Muslim nation of the United Arab Emirates.

The latest export figures released by Wine Australia have revealed that in the wake of tariffs slapped on Australian wine by Beijing in late 2020 of as much as 218 per cent the China market has gone from Australia’s biggest wine export destination to one of its smallest that now only buys 1 per cent of wine exports.

The average value of Australian wine sold into China now has also collapsed by 65 per cent to an average of $4.09 per litre, to totally destroy a once buoyant market that could devour as much Penfolds Grange and other luxury premium wines Australian winemakers could send off to the Asian giant.

Australian wine had enjoyed the most sought after status in China for years. In 2014, South Australia’s Chateau Tanunda scored a major coup when Chinese President Xi Jinping and then US President Barack Obama were photographed at the G20 meeting in Brisbane drinking a glass of its award-winning wines.

It was only just before Covid-19 emerged that Australia hit $1.1bn of wine sold into China and Chinese drinkers made Australian wine their favourite drop, displacing wines from France as the country’s most sought after wine.

But the damage has been done by the tariffs, introduced in late 2020, that made it almost impossible for Australian winemakers to remain competitive in China and came as tensions between Beijing and Canberra escalated which also saw Australian coal, seafood, timber and other commodities singled out for tariffs or import bans.

The collapse of the Chinese market has dragged down total exports. According to Wine Australia’s latest export data Australian wine exports declined by 10 per cent in volume to 625m litres and 19 per cent in value to $2.08bn in the year ended June 30, 2022.

The decline in volume and value was not unexpected, as it was largely the result of the continued impact of the significant reduction in exports to mainland China, driven by high deposit tariffs imposed in November 2020. This is expected to remain a significant influence on the moving annual total data of Australian wine exports until late 2022.

Wine Australia manager for market Insights, Peter Bailey, said that while the total data showed declines, there were some encouraging signs in key and emerging markets.

“When mainland China is excluded from the data, exports increased by 5 per cent in value to $2.06bn, an increase of $105m – the highest value since 2009–2010.

“This is despite volume declining by 3 per cent to 619m litres. The value growth for these markets was driven by a 9 per cent increase in average value to $3.32 FOB per litre,” he said.

“The key contributors to the value growth included Singapore, the US, Malaysia, Thailand, India and New Zealand.”

Red wine accounted for 92 per cent of the value of exports at $10 or more per litre.

“This is critical as the reduction in exports to mainland China was predominantly still red wine. Off much smaller bases, still white wine and rosé also grew strongly in this price segment,” Mr Bailey said.

The top five markets in terms of value for exported Australian wine were the US, up 9 per cent to $436m, Britain, down 10 per cent to $421m, Canada, down 5 per cent to $174m, Hong Kong, down 9 per cent to $170m and Singapore, up 49 per cent to $169m.

Originally published as China was once a billion dollar market for Australian wine, now it is a market the same size as Sweden