Wine boss warning: ‘Beware of too many eggs in the China basket’

Australian winemakers need to be wary of too much exposure to the China market despite the lifting of tariffs, the CEO of Hugh Hamilton Wines has warned.

‘It was brutal … It was a tap that was turned off overnight’: Mary Hamilton of Hugh Hamilton Wines in McLaren Vale, South Australia. Picture: AAP

Australian winemakers need to be wary of having too many eggs in the Chinese market, despite the lifting of tariffs in March, South Australian winemaker Mary Hamilton says.

Ms Hamilton, chief executive of Hugh Hamilton Wines, said Australian winemakers were “flooding back” as they sought to re-establish themselves in the China market after the end of three years of tariffs that crushed a once-lucrative export trade.

While she still sees plenty of opportunities in the China market, Ms Hamilton, who is a speaker at The Australian’s Global Food Forum on July 17, said winemakers should be wary of too much exposure to a market that could be turned off overnight if there was another dispute between Canberra and Beijing.

“There’s been a flurry of activity since the lifting of the tariffs in terms of wine businesses in Australia quickly trying to re-­establish their trade links with China,” she said. “We’re no different to that. We have got our previous clients back and purchase orders are coming in.”

She said winemakers should nevertheless remember that the China market was potentially vulnerable to any renewed political tensions: “The next time the two governments are having a fight with each other, are we going to see the market turned off again?

“It’s very worrying because the last time around we saw Australian wine businesses put too much reliance on the China market.

“The industry has got a big job to do to keep developing other markets,” she said.

Ms Hamilton, a sixth-generation member of one of Australia’s oldest winemaking families, said it was understandable that the industry had been heavily focused on the China market in the past because of its sheer size as a potential export market.

The Chinese market was worth more than $1.1bn for the Australian wine industry before exporters were hit with tariffs of up to 212 per cent as a result of an anti-dumping action taken by the Chinese Ministry of Commerce, which was widely seen as part of a suite of politically motivated trade sanctions.

The Chinese market was worth more than $1.1bn for the Australian wine industry before exporters were hit with tariffs of up to 212 per cent.

“I understand why it happened because, without a doubt, China was the biggest fish in the sea.”

“Everything else was dwarfed by China.

“That was where the ­action was – that was where all the volume was,” she said.

“But we have seen just how vulnerable that strategy is when a country turns off the trade overnight.

“The industry had to quickly start going into overdrive to start fostering other markets.”

She said Hugh Hamilton Wines was already reviving its China marketing strategy, resuming talks with previous customers with a shipment of wine already headed to China.

She said the company was also looking to develop other markets in Asian countries such as Vietnam, Malaysia and Indonesia as well as Canada and the US.

Hugh Hamilton Wines had been making 7 per cent of its total revenues selling to the China market before it was hit by the ­tariffs.

“It was brutal,” she recalls.

“It was a tap that was turned off overnight.

“It really did shake the industry to its foundations.”

While this was damaging to her family business, she said it was devastating for some other wine companies that were reliant on China for a much greater proportion of their revenues.

“I had neighbours who had as much as 90 per cent of their business selling to China,” she said.

“It was a mortal wound for them.”

She said some of these companies had gone out of business or had to sell off property because of the tariffs.

Australian winemakers were “flooding back” to the China market since the end of the tariffs, she said, but she did not believe the market there would be as large as it was for Australian winemakers before the tariffs were imposed.

“It will certainly be a meaningful part of an international export strategy, but whether it will be as big as it was before is debatable,” Ms Hamilton said.

She said exporting was important for the Australian wine industry, given the small size of the local market of only 27 million people, but exporting also came with the potential for market changes.

There was significant potential for Australian winemakers to sell into the growing middle class markets of other countries in Asia, Ms Hamilton said.

She said she could see markets in Asia developing along the lines of the China market with their emerging middle classes and the convenience of them being closer to Australia than other markets such as Britain and Europe.

The North American market also had significant potential for Australian winemakers.

Ms Hamilton said the Australian wine industry needed to focus on developing an export strategy around premium wines as it could not compete with the cheap wines from South America and South Africa, where labour costs were so much lower.