Penfolds boss Tom King meets China drinks industry body in sign of thaw in trade relations

Luxury wine giant Penfolds has held talks with a powerful Chinese drinks industry body that could reflect a thawing of trade relations between Beijing and Canberra.

Penfolds managing director Tom King held a meeting with a key Chinese drinks industry body that could signal a thawing of relations between China and Australia.

The boss of Australian luxury wine brand Penfolds has held high-level meetings with the powerful Chinese drinks industry association that three years ago made damaging anti-dumping allegations against Australian winemakers — and which ultimately led Beijing to impose punishing tariffs that destroyed a $1.3bn export market.

The meeting last week between Penfolds managing director Tom King and peak industry body the China Alcoholic Drinks Association (CADA) could be further evidence of a gradual thawing of prickly trade relations between China and Australia, which in 2021 caught Australia’s $45.5bn wine industry in the crossfire as crippling tariffs were placed on imported Australian wine.

At a meeting last week the Penfolds delegation, led by Mr King and Penfolds greater China sales manager Wu Mingfeng, were reportedly warmly greeted by officials at CADA where they were told that China welcomed quality wines into the country.

“The Chinese market is an open market and quality wines are welcome to enter China to meet the needs of the majority of consumers in their pursuit of a better life,” CADA executive director Wang Qi was quoted as saying in a CADA report following the meeting with Penfolds.

The convivial gathering at the offices of the industry body and upbeat comments from its executive director are highly symbolic given it was CADA in 2020 that requested the Chinese Ministry of Commerce launch separate anti-dumping and countervailing duties investigations on Australian wine in China.

In a brutal 117-page report CADA listed pages of grievances against the Australian wine industry, accusing it of distorting the Chinese wine market and accepting a range of subsidies, grants and tax concessions from the Australian government that was causing “material injury” to the domestic Chinese wine industry.

The commerce ministry happily took up the CADA request and completed its investigations within a year. It then slapped damaging tariffs on imported Australian wine ranging from 116 per cent to 218 per cent, all-but destroying a billion dollar-plus market for Australian winemakers, including Penfolds.

The tariffs were particularly damaging to Penfolds, owned by ASX-listed winemaker Treasury Wine Estates, as it was incredibly popular in China and helped drive the bulk of Treasury Wine’s annual profit growth.

But now a window could be opening to mend relationships between Beijing officials and the Australian wine industry.

Mr King’s trip to China will soon be followed up by Treasury Wine chief executive Tim Ford, who will get a chance to visit the region for the first time since the outbreak of Covid-19 and meet with his own staff at the winemaker’s offices in Shanghai.

Penfolds had grown to become a highly sought after wine brand in China before tariffs were slapped on the Australian wine industry.

Also under discussion at last week’s meeting between Penfolds and CADA was Treasury Wine’s burgeoning Chinese-sourced Penfolds label that was launched last year using the promising wine grape growing regions of Ningxia, in the country’s central north, and Shangri-la in the southwestern Yunnan province. The “made in China” Penfolds range also got around the tariffs issue as they were grown and made in China.

According to reports from CADA, its executive director Mr Wang told the executives from Penfolds — whose Chinese subsidiary is a member of the association — that they recognised Treasury Wine’s Chinese-made wine strategy and hoped the Australian winemaker would “introduce more of China’s premium wines to the world” in the future.

It also said it would act to protect Penfolds and other Australian winemakers from counterfeit wines, which are prolific in the Chinese market.

“If any counterfeit or shoddy products flood into the Chinese market, disrupt the market order, infringe on consumers‘ rights and interests, and harm the healthy development of China’s wine industry, the CADA will fully co-operate with the initiatives of the relevant state departments.”

Strategic co-operation and “ways to enhance the international reputation and influence of Chinese wine” were reportedly discussed, including China Wine’s IP, campaign, and business environment of China’s wine regions including Ningxia and Shangri-la.

The meeting came after Mr King relocated to Melbourne with his family in late 2022 after running global luxury wine brand Penfolds from Shanghai for four years.

A spokeswoman for Treasury Wine said his visit to China last week with Penfolds winemaker Matt Woo included customer meetings, staff meetings with the Shanghai team, and discussions with CADA on their long-term collaboration.

“The partnership with China’s primary alcohol industry body was announced last year to coincide with the launch of Penfolds first China-made wine. The strategic co-operation agreement will see Treasury Wine Estates and CADA work together to build China’s wine industry, sharing technical expertise and brand support to develop world-class quality, integrity, and valuation systems for Chinese grapes and wine.”

The Treasury Wine spokeswoman said the move to collaborate with CADA and the broader sector cemented the winemaker’s commitment to partnerships with the Chinese wine industry, and acknowledged the strong equity that the Penfolds brand has established with its consumers in China for more than a century.

Originally published as Penfolds boss Tom King meets China drinks industry body in sign of thaw in trade relations