Wineries pouring back into China

Australian wine exports are pouring into China after the lifting of crushing tariffs, but a shrinking Chinese wine market means it is unlikely to reach former high volumes.

Sirromet CEO Risko Isic and director Nadine Delahunty with the first container shipment of wine to China in three years. Picture: Lyndon Mechielsen

Australian wine exports are pouring into China after the lifting of crushing tariffs, but a shrinking Chinese wine market means it is unlikely to reach former high volumes.

The value of Australian wine exports to China plunged from $1.3bn in October 2020 to less than $1m last year after the Chinese government introduced a 220 per cent tariff amid heightened diplomatic tension between Beijing and Canberra.

It caused havoc in the Australia wine industry, which had been heavily reliant on the Chinese market, at a time when the world faced a glut in wine production.

In the month since China announced it would lift the tariff, Australian wine exporters have started re-sending shipments to the industry’s most valued export market.

Surveys show the Australian wine brand remains hugely popular in China, but cost-of-living pressures and a long-term decline in alcohol consumption from younger generations mean the Chinese wine market is only about a third of its former size, according to industry body Wine Australia.

“The early indications are that it’s looking promising for a number of exporters,” Wine Australia market insights manager Peter Bailey said.

“But I think we just need to temper our expectations that our exports will return to those sort of levels in the short term.

“That’s due to the changing nature of the China wine market.

“The import wine market in China is now a third of the size that it was before, so that would essentially mean that the size of the opportunity may not be as big as it was previously.”

Exports into China from other wine-producing nations have also shrunk, but Mr Bailey said a Chinese fondness for Australian wine could help to regain market share.

“Imported wine consumption had been declining prior to Australia exiting the market, but we were still going against that trend,” he said. “So that would give us a cause for hope as well.”

Among the Australian wine producers hoping to capitalise on the reopening of the Chinese market was Sirromet, which grows grapes in the high-altitude Granite Belt region in southern Queensland.

A shipping container filled with 8000 bottles of Sirromet wine, worth about $300,000, has been sent to the Port of Brisbane and will next week make its way to China. Another four shipments are expected to leave within the next month.

The forced shutdown of the China market was a huge financial hit, but it gave Sirromet an opportunity to diversify its business, which includes tourism and events, and focus on mirroring the consumption trend of quality over quantity.

“We are starting to limit how much we would like to export,” Sirromet CEO Risko Isic said.

“We have some rigorous control measures and a high quality that we expect, but it does reduce significantly the production of wine.

“We are now crushing three times less than prior (to the tariff).”

Along with other Granite Belt wineries, Sirromet is working hard to change perceptions of Queensland wine that Mr Isic insisted are outdated.

Over the past decade, many winemakers in the region have shifted from traditional varieties based on consumer trends and focused more on growing varieties more suited to the region’s climate and terrain.

That includes Mediterranean varieties such as pinot grigio, nebbiolo, montepulciano, fiano and vermentino.

“They suit the climate much better than some of the heavier wines that used to be grown here,” Mr Isic said. “It was a big decision to do these changes after 22 years, they are fundamental changes to the business, but at the end of the day, if we make great wine, as the largest producer in Queensland it will make the whole region look better.”