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China’s 3rd largest wine producer offloads over 300 ha Australian vineyards

vino-joy.com by Natalie Wang13/07/2022  

Weilong Grape Co, China’s third biggest wine producer, plans to sell over 320 hectares of its vineyards in Australia for RMB 660.6 million (AU$143 million), one year after China’s punitive tariffs on Australian wines have crushed its grape dream.

According to a statement released by Weilong on July 6, the country’s third biggest wine producer and largest organic winery, it would sell its vineyard holdings in Coomealla and Nyah in Murray, which account for 76% of its total wine production in Australia, to “alleviate its financial and managerial stress for its Australian subsidiary”.

The Shandong-based Chinese wine producer bought the vineyards between 2016 and 2018 in what was described as Murray’s “biggest investment in a decade”, executive officer of Murray Valley Wine Growers, Mike Stone, told Australian news ABC.

At the time, when China-Australia relations are friendly, China was Australia’s biggest and most profitable export market, and it spurred a winery buying spree from Chinese investors.

Riding on the growth wave, Weilong in the past few years purchased about 600 hectares of vineyards in Victoria and New South Wales, and built a brand-new 26,000 tonne capacity winery just south of Mildura “with plans for future expansion”, it announced at the time.

The company was targeting to ship Australia-made wines back to the vast Chinese market, and its winemaking facilities in Australia would eventually crush 170,000 tones of grapes a year. It reportedly raised AU$120 million for the Australian wine project.

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Weilong’s vineyards in Australia (pic: Weilong)

But it all came to a crashing halt when China announced an anti-dumping investigation into Australian wines in August 2020, corking AU$1.2 billion Australian wine exports.

The sale came just a year after China formally introduced up to 218% punitive tariffs on Australian wines that have shaved AU1.2 billion Australian wine exports to just AU$214 million within a year.

This is the first major selloff from a Chinese winery after crushing punitive tariffs have made it nearly impossible to ship Australian wine back to the Chinese market.

The sale as the publicly listed company disclosed to Shanghai Stock Exchange included 167.55 ha vineyards in Coomealla and 260.41 ha in Nyah and other associated assets, for AU$26.6 million and AU$44.4 million, respectively.

With the sale, Weilong is still left with some vineyards in Australia. While it’s offloading its vineyards fast, the company says the move is to relieve financial stress and if relations between China and Australia improve, it has supplies that can meet the company’s demand in the next two years.

But with millions of liters of wines in storage and pressure from new vintage harvest, many wines are wasted and fresh grapes are left on the vine withered.

DIVEST

Just before 2020, Chinese investors were buying Australian vineyards and wineries at unprecedented levels, with up to 10% of Barossa Valley vineyards sold to Chinese.

Australian Swan Vintage, the Chinese-owned Australian winery and creator of Auswan, was Australia’s third largest wine exporter to China behind Treasury Wine Estates and Casella Family Wines. Since 2021, it has diversified and pivoted its business away from selling Australia-made wines to China. It has launched Baijiu products and announced production of locally made Chinese wine in Ningxia.

Changyu Wine Pioneer, the country’s biggest winery, previously bought has Clare Valley-based winery Kilikanoon Wines for AU$20.6 million in 2017.

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