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Penfolds launches a China-exclusive wine by NATALIE WANG03/08/2022  

Executives from both Penfolds and VATS Liquor Store at the launch event hosted on the sideline of Hainan Expo which ended on July 30 (pic: Penfolds)

Penfolds, the flagship Australian wine brand owned by Treasury Wine Estates, is far from winding down its business in China in wake of crushing tariffs, and has just unveiled a China-exclusive wine with the country’s VATS Liquor Store, a nationwide wine and spirits distributor.

The surprising wine Penfolds Tribute 177 is made from Californian grapes instead of the heavily levied Australian ones and is understood to be created exclusively for VATS Liquor Store for the mainland Chinese market only.

Named ‘Tribute 177′, the Cabernet-based wine is described as a limited edition release launched to celebrate Penfolds’ 177th anniversary since its founding in 1844, and don’t expect to find this wine anywhere else as it is “exclusively tailored for the Chinese market,” the company announced at the China International Consumer Products Expo held in Hainan, China’s largest free trade port.

Penfolds Tribute 177 is a wine made in California and exclusively for the Chinese market (pic: Penfolds)

Since China officially slapped up to 218% tariffs on Australian wine, it essentially cut off the lucrative Chinese market to Australia. Wine exports as a result plunged from AU$1.2 billion to just AU$200 million within a year, and TWE, the biggest exporter of Australian wine to China, bore the brunt of the loss.

The company said its profits in mainland China plunged by 97% in the first half of Fiscal Year of 2022. Its EBITS (Earnings before interest, tax, SGARA and material items) in mainland China declined to just AU$2 million from AU$78.2 million of the same period last year. The drastic decline represents almost a 97.4% loss, as we have reported.

Yet, the sheer size of the market and Penfolds’ immense popularity in China still makes TWE hard to part ways. Penfolds has confirmed that its made-in-China Penfolds will be launched in the second half of this year, and it has swapped heavily taxed Australian Penfolds with California-made and South Africa-made wines to the Chinese market.

Indeed, Penfolds’ General Manager of China Wu Mingfeng echoed the company’s long-term commitment to the market. Speaking of the release, he said at the launch event during the Hainan Expo that the wine shows “Penfolds’ continued commitment to the Chinese market, and its resolve to grow together with its partner in China.”

The partnership with VATS Liquor Store as the company says is a further step into their collaboration that first began in 2017. Owned by Wu Xiangdong, one of the 10 richest drinks billionaires in China, VATS Liquor Store was founded in 2005 in China’s central Hunan province and operates some 2000 stores across China today.

In 2021, despite the impacts of the pandemic, the wine and spirits distributor turned in RMB 7.46 billion (US$1.1 billion) in sales, a year-on-year increase of 50.97%, according to Chinese language newspaper Hunan Daily.