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Penfolds MD: made-in-China Penfolds is just the first step

vino-joy.com by NATALIE WANG22/05/2022  

Penfolds’ first-ever Chinese wine sourced from China’s premier wine region Ningxia is set to be released in the market in the second half of the year as the popular Australian wine brand’s “first step” to demonstrate Penfolds’ commitment to “play a meaningful role in development of China’s wine industry”, according to its Managing Director Tom King.

Priced for AU$30-50 (RMB 140- 235) a bottle as an entry-level wine, the Chinese Penfolds is made predominately of Cabernet Sauvignon grown in China’s northwestern wine region Ningxia.

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The first Chinese Penfolds upon release will be sold only in the Chinese market, as Treasury Wine Estates clings to hold onto its established market share inside the lucrative Chinese market.

Speaking to Vino Joy News virtually while under Shanghai lockdown, Tom King, called the first release “a trial”, which would allow the company to “step up experience and engagement” in the Chinese market.

It’s not revealed at this stage the vintage of the wine or if the grapes come from the singular winery or a collective of producers in Ningxia, but the Penfolds executive did not rule out possibilities of launching more wines from the Chinese project or even building a local Penfolds winery.

According to King, the project has been years in the making with Penfolds’ winemaking team making first-hand visits to local wineries before settling on the final blend. The punitive tariffs that were first announced in 2020 and formalized in March 2021 as a result expedited the process, he says.

Making a Chinese Penfolds, according to him, is “a natural evolution” in line with its multi-blend philosophy, following release of Penfolds California and upcoming Penfolds Bordeaux in August.

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Tom King, Managing Director of Penfolds (pic: handout)

The Cabernet-based wine blend, as the executive assures, is of Penfolds house style and quality standard.

The launch of a made- in-China Penfolds will also enable the company to sidestep China’s punitive tariffs slapped on Australian wine exports by Chinese government.

Treasury bear the brunt of China’s punishing tariffs as it was Australia’s biggest wine exporter to China, and around a quarter of its top-range Penfolds were sold in the market, prior to the tariffs.

Its latest financial results also reflected the loss. Its profit from the mainland China business fell to AU$2 million in the six months ended Dec. 31, from AU$78.2 million a year earlier. 

Alliance with CADA

One of the most strategic moves Penfolds has made about the Chinese market is its surprising alliance with China Alcoholic Drinks Association (CADA), the official body regulating China’s drinks industry and also the same organization prodding Chinese government to launch anti-dumping investigation into Australian wine in 2020.

According to Penfolds, the long-term an multi-faceted agreement with CADA will see TWE and CADA work together to build China’s fast-growing wine industry capability.

The partnership will involve technical knowledge and expertise exchange in China wine region development, programs to champion wine education and wine culture, and brand support for the development of world-class quality, integrity, and valuation systems for Chinese grapes and wine.

The collaboration as King says is “a need” for the brand to demonstrate its commitment and would allow Penfolds to “play a more active role in the development of China’s wine industry”.

In recent years, locally produced Chinese wines are quickly winning over Chinese consumers riding on the back of surging “Guochao” or “China chic” trend, where consumers favor domestic products that incorporate Chinese traditions and culture.

CADA also played an active role in advocating Chinese wine drinkers to drink Chinese wine, a campaign launched during the pandemic.

It’s not known if Penfolds’ China strategy will inspire other Australian wineries to follow suit. Australia’s overall wine exports to China had shrunk from AU$1.3 billion to just AU$214 million in the last 12 months ended in March this year, according to Wine Australia data.