Jacob’s Creek owner warns the lifting of Chinese tariffs won’t be the panacea the Australian wine sector is hoping for

Jacob’s Creek was one of the biggest selling Australian wines in China before tariffs ruined the business, but its boss has warned not to expect a miracle if tariffs are dismantled.

Pernod Ricard Winemakers CEO Bryan Fry, whose Jacob’s Creek label was one of the biggest selling imported wines into China before tariffs crunched the business, says the lifting of Chinese tariffs won’t be the “panacea” the Australian wine sector is hoping for.

Mr Fry said the local industry had previously piggybacked on soaring export sales into China to help alleviate a structural oversupply of grapes and wine, but that if improving trade relations between Beijing and Canberra did lead to the removal of those crippling tariffs, it wouldn’t necessarily trigger a return to boom time conditions.

The chairman and CEO of the French wine giant, whose wine brands include global juggernaut Jacob’s Creek, St Hugo, Brancott Estate and Stoneleigh, also said Chinese consumer tastes had changed, with wine sales dropping and rival beverages such as beer and Chinese distilled spirit baijiu gaining market share.

Recently, the Chinese government announced a five-month review into its tariffs on Australian wine, which has raised hopes the tariff charges will be eliminated to resolve the issue in a similar way that duties on Australian barley were also dismantled.

“What’s been done with the Australian government in the last couple of weeks is a great move, and if we can do the five-month process and we have the same result as barley that would be great,” Mr Fry told The Australian.

“What we need to do as an industry is be mindful of how we go back in, because one of the things with China is that it became the panacea as the Australian wine industry had been structural oversupplied since 2011.

“So China was a wonderful thing, but we are just going to need to be careful of just how we go back in because before the tariffs the average price of Australian wine was declining.”

Before the tariff, Jacob’s Creek was one of the top Australian sellers into China.

Before those wine tariffs of more than 200 per cent, Australian wine exports to the Asian giant was sitting at about $1.3bn a year, with French multinational Pernod Ricard’s Jacob’s Creek the second or third-largest Australian wine sold into the nation.

Now with hopes of those wine tariffs being eliminated, Australian winemakers are hoping to re-enter the market where their wine had won a huge following.

But there are shifting consumer tastes in China, Mr Fry warned, and Australian wine companies should not expect a quick return to the heady days of Australian wine dominating restaurants, bars, dinner parties and banquets.

“Chinese consumers have actually changed. If you look at domestic total wine consumption, it has dropped 20 per cent in the last year, so there’s been a lot of movement back to baijiu, beer, so we need to go back in and just don’t think it’s going to be the miracle pill,” Mr Fry said.

“We need to go back and do the right things, build a quality market with quality activation and at good price points.”

While Australian wine had been largely absent from Chinese menus and shops due to the tariffs, rival countries, such as France and Chile, had won market share, but Mr Fry said drinkers could be won back to Australian labels if the right groundwork was done.

“I think the French have done reasonably well. But you actually look at it, and they have picked up on price points, but I’m not sure they have picked up a huge following,” he said.

“And we have also done research on consumers, we know that there’s still a very high favouritism to Australian wine and I think that, again, as long as we go back and make a bit of an effort to re-engage with the Chinese consumers, they’ll be very open.

“We still have that latent clean and green view which I think still helps, and we can’t lose that, but we need to go back in, spend some shoe leather, do tastings, but it isn’t going to happen overnight.

“I don’t think that they’re going to suddenly go back tomorrow – we need to work hard.”

However, what concerned Mr Fry was that if a rush back into China saw many Australian winemakers slash prices and compete at the bottom end of the market as they look to ring up sales and win market share.

“My view is that we should go back in, work hard and populate profitable price points for the ­future,” he said.

Originally published as Jacob’s Creek owner warns the lifting of Chinese tariffs won’t be the panacea the Australian wine sector is hoping for