Penfolds looks beyond China’s wine tariffs to reclaim paradise
In Mandarin, Penfolds fortuitously translates as ‘route to prosperity’. Now, thousands of metres above sea level in China, chief winemaker Peter Gago is ready for the post-tariffs rush.
Standing among vineyards in Shangri-La, Peter Gago can see clearly across to the Jade Dragon Snow mountains at the foothills of the Himalayas.
His perch in China’s rugged and remote Yunnan province provides breathtaking views of deep ancient gorges and wide flowing rivers.
Gago acknowledges he has bags under his eyes and possibly some altitude sickness as he walks along the high-altitude vineyards planted at more than 2200m above sea level. It’s also possible some of the weariness is due to his recent globetrotting – Paris, Chicago and New York – just in the past fortnight. And now Mingyong village, Shangri-La.
But Gago isn’t just any tourist on an overseas jaunt. He’s the chief winemaker for Penfolds, Australia’s most famous wine label, and he is in China flying the flag for the brand just as relations between Canberra and Beijing are warming, increasing hopes crippling Chinese tariffs placed on Australian wine could soon be dismantled.
Gago also isn’t a stranger to the region.
“Now we are here in China which is the future; having said that, this is not just a dalliance. I’ve been coming here for 30 years and we have never stopped working here ever, through tariffs, which is why this tariff is a bit of a hiccup, and we’ve done global launches out of China. We’ve done Penfolds recorking clinics in Shanghai. For us it never stopped,” Gago tells The Weekend Australian from the Shangri-La winery.
“In two months’ time Penfolds will be 180 years old. What I’m doing now and if you could see the bags under my eyes, those bags under my eyes are paying for the next 180 years.
“And we need wine, handshakes and relationships; the business follows and the wine comes first.
“And the important gatekeepers here haven’t stopped drinking our Penfolds wine. We never stopped telling the story here in China. For us it has been pretty much ‘business as normal’. That has never stopped, that sort of work, and we are ready to go again.
“I will be doing events while I’m here this week, with locals, with government and hopefully with the China Alcoholic Drinks Association (CADA).
“We will reunite with them and it’s the old game of wine – pressing the flesh, pouring a glass, having a bit of a joke, having a laugh and that’s what we have been doing all the way through which is going to be maintenance of relationships and forging some new ones.”
A catch-up with CADA should be particularly important as it was this peak Chinese industry body that requested the Chinese government to investigate dumping allegations into Australian wine, which then led to the imposition of harsh tariffs.
Those tariffs imposed on Australian wine of more than 200 per cent made Penfolds, as well as any other wine from our shores, almost impossible to sell in China. But for Penfolds collectors and enthusiasts price wasn’t a barrier.
Then there was also the growing range of Penfolds made outside of Australia, sourced from California’s Napa Valley and in Champagne, France, that Gago has led the charge on.
He was in Paris just one week ago for a dinner at the famous Palais Garnier opera house that inspired Andrew Lloyd Webber’s Phantom of the Opera and where Gago collected for Penfolds – for the third time in a row – the award for the best fine wine producer outside of France.
There is a limit of three years of consecutive awards, so Penfolds won’t be running next year.
Today he’s at a small village in Shangri-La, thousands of metres above sea level, where most villagers probably don’t even know the rock star that Gago is in international wine circles.
He is there to oversee vineyards and grapes, chat with growers and check on the current harvest. The wine will eventually be bottled in the Penfolds “made in China” vintage, called CWT 521, which in its first release this year proved a huge success.
“I can’t believe how upbeat I am and I am sleep deprived, jetlagged, but you come here and I’m short of breath because it’s so high and it is so exciting, working with real people making real wine,” Gago says.
In China Gago walks a path well worn by previous Penfolds winemakers and brand ambassadors. Penfolds first sold wine into China in 1893, and Gago says the company still has the original invoice in its archives. Fast forward to today and patiently sitting in a Shanghai office is a bottle of Penfolds Grange 1953 – the birth year of China’s President, Xi Jinping, which hopefully will one day be poured and tasted in his presence at a trade show or official state event.
“When I started working in China all those decades ago I was only working with the military, army chiefs, we put in the hard yards building the brands. Lots of winemakers in the US or Australia have sold here but it’s a black box, a container of wine arrives here, but we’ve been building the brand actively,” he says.
“In Mandarin Penfolds means ‘route to prosperity’. That’s real, and we didn’t plan that, that’s by luck.
“Penfolds Bin 389, Bin 128, Bin 28, so the use of the number eight, (eight being a lucky number in Chinese culture) we have been so lucky in the market yet we have used that luck to propel the brand build and create relationships.
“And that’s why when the tariffs hopefully come off it will be business as usual and the only problem will be accessing the wines they want overnight, and that will happen.”
Whether it’s collecting awards in Paris, dining with diplomats in New York or exchanging pleasantries with local Shangri-La village farmers, the common thread that leads Gago is selling the Penfolds wine to the world.
And now the most promising part of the world is China once again. It was a thriving market before 2021 when Beijing’s wine tariffs decimated the $1.2bn Australian wine trade there and one of Penfolds’ biggest export markets.
But this week’s news that Beijing would review the wine tariff regime – which many believe is the first step to tariffs eventually being eliminated – has energised Australia’s wine industry.
Slightly out of breath, Gago walks the steep hills of the Shangri-La region where Penfolds is sourcing cabernet sauvignon. A second vineyard in Ningxia, north-central China, is also producing wine for the Penfolds label. They both formed the newest wines for Penfolds in its CWT 521 collection, selling for about $150 a bottle.
“Modern viticulture started here in the area I’m in, Shangri-La, back in 1892; now Penfolds started selling wines in China in 1893 and, sure, through the Long March and wars there were breaks. But this isn’t a magic wand we have raised and said, ‘Oh, China is a good market, let’s get in there’. We have been there a long time,” he says.
Gago says his wine team was uninterrupted by tariffs and trade tensions. It continued working in the vineyards, harvesting, creating and tasting to make sure the wine had that touch of Penfolds magic and the taste profile that is emblematic of the Australian brand.
And while many collectors and high-net-worth individuals were able to enjoy Penfolds wine through the tariffs-hit period by opening their collections, there were also Chinese consumers sourcing wine through duty free shops and Hong Kong.
“China is a country that loves to eat and drink. At the end of the day that’s all people talk about, their next meal – so yes, per capita it is very small but the potential here is immense,” Gago says.
“Yes there is the odd economic cycle, which happens everywhere, and our problem will be supply really, and that’s why we have brought out Penfolds made in Bordeaux, that’s why we are increasing volumes of what we make in California and why we are continuing to plant vineyards in Australia.
“We are looking at the next 180 years, and there are going to be blips, there’s going to be hurdles – tariffs was one of them – but when you look at that across 180 years it was just a blip.
“China cannot be denied as being a major market, and I love working here, we love working here and always have.”
Read related topics:China Ties