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Australian Wines Reenter China: Enthusiasm Meets Market Caution

vino-joy.com by Morris Cai08/06/2024  

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Australian wine regions and wineries have stepped up their promotional drives in China after Beijing scrapped steep tariffs on their products at the end of March. While the industry’s return has sparked enthusiasm, buyers are treading cautiously amid economic uncertainties and the looming impact of cheap Australian wines—up to 100 containers—previously stored in bonded areas now flooding the market.

Buyer’s Caution Amid Modest Orders

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The New South Wales Government, in collaboration with ProWine, recently orchestrated the 2024 New South Wales Wine Greater China Roadshow, making stops in Shenzhen and Shanghai on June 4th and 6th, respectively. As Australia’s second biggest wine producing state, New South Wales boasts 16 distinct wine-producing regions, with Hunter Valley being the most renowned region.

“The enthusiasm is palpable. People are eager to rediscover Australian wines,” Mark Woods, Director and Senior Winemaker atLeogate Estate, told Vino Joy News. “We’re keen to forge strong ties with importers and distributors here, aiming to reintroduce our wines to the discerning Chinese palate. A client of ours expressed continued interest in our offerings just today.”

Yet, Woods remains pragmatic about the economic conditions. “The economy is slowing down. It’s going to take some time before we see more vigorous activity. Rebuilding momentum will certainly require patience,” he added.

Leila Wang, the China representative for Australia’sAngullongwinery, echoed similar sentiments, “The zest for Australian wines is substantial. Merchants previously engaged with Australian vineyards are quick to replenish stocks, whereas newcomers are treading cautiously.” Prior to the tariffs, China was its second biggest market.

At Hunter Valley’s Broken Wood booth, Stanley Li, the Chairman ofGuangzhou Mega Wines(广州澳太酒业), was seen helping the winery managing its stall. Before the imposition of anti-dumping duties, his company was a key importer in importing various Australian wines from different wine regions, Li noted, “Orders are indeed coming in, but they’re on the smaller side.”

Backlog of Stocks Impacting Market

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In addition to economic downturn that’s fuelling buyer caution, Wang also mentioned another market disruptor that’s impacting Australian wine prices and stability – a backlog of discounted Australian wines hitting the market now. “The wave of discounted Australian wines from old inventories previously stored in bonded areas has added a lot of pressure to the market.”

The large stock of Australian wines that have accumulated due to punitive tariffs since late 2020 meant that many importers delayed customs clearance. Industry insiders estimate that over 100 containers were affected. As these wines age and potentially deteriorate due to poor storing conditions, importers now are compelled to sell them at steep discounts, which can destabilize market pricing and affect the perceived value of newer wine imports.

“The competition is fierce! Australian wines that held in bonded areas for three years are now entering the market at reduced prices. Besides, Australian wines still face competition from French and Chilean counterparts, with a considerable inventory still in the market. The crowded marketplace necessitates cautious procurement strategies,” Pan Liu, Marketing and Promotion Director atWintek (Shenzhen) Import & Export Ltd.( 深圳稳德进出口有限公司), outlined a challenging market environment.

“The competition is fierce! Australian wines that held in bonded areas for three years are now entering the market at reduced prices. Besides, Australian wines still face competition from French and Chilean counterparts, with a considerable inventory still in the market. The crowded marketplace necessitates cautious procurement strategies.”——Pan Liu

In this strained context, Australian wineries are mindful of current economic mood. Will the market return to its 2019 level? “This year and next? Probably not,” remarked Andrew Moody, export manager atTyrrell’s Wines. “We’re all aware of the economic downturn here. We’re striving to expand our presence in restaurants and hotels, aiming for a broader audience to enjoy our wines in these venues. The current state of the restaurant and property markets, coupled with job difficulties, directly impacts wine sales.”

Before the trade measures, China was the second-largest export market for Tyrrell’s.

Young Consumers and a Cleaner Market

Despite overall sombre macroeconomic outlook, some wineries and importers see silver linings and growth opportunities. Moody of Tyrrell’s shared, “The orders we have received from China predominantly consist of white wines—two-thirds of one container for two customers are white.”

Hunter Valley, known not just for its Shiraz and Cabernet Sauvignon but also for its white wines like Semillon and Chardonnay, aligns well with the burgeoning Chinese market for white wines. During the roadshow, Vino Joy News observed numerous buyers specifically requesting white wines. Exhibitors noted a perceptible shift in market preferences.

“China is evolving,” Moody observed. “Previously dominated by red wine, associated with older consumers and traditional gifting at banquets, we’re now seeing younger demographics show a preference for white wines.”

Its Chinese importer and distributorTorres Chinaagreed. Nancy Yang, South China Market and Direct Sales Director at Torres China detailed the strategic approach to harnessing this trend: “As an importer, we’ve been cultivating a consumer base and promoting our brands strategically. Going forward, we plan to focus on mid-priced, ‘fresh-style’ wines, particularly in dining and casual drinking settings, priced between 100-200 yuan.”

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Helen Sawczak, Senior Trade & Investment Commissioner–Greater China for New South Wales

Encouragingly, many wineries and importers remain optimistic on the Chinese market. At the Shenzhen roadshow,Helen Sawczak, Senior Trade & Investment Commissioner–Greater China for New South Wales, noted, “In April alone, Australia’s sales to the Chinese market surpassed the total of the last three years combined.”

Newcomers likeBlackgate Estate, a family-owned winery that only started bottling in 2017, are also exploring the Chinese market now that tariffs are lifted. Co-owner Carla Nehme reflected on their previous absence, “The market was very full.”

In addition, Moody of Tyrell’s pointed out a “cleaner market” today for Australian wine exports. Previously, a notable portion of Australian wine exports to China were driven by wealthy Chinese individuals engaging in trade as a means to secure residency visas in Australia. This trend propped up wine exports until the introduction of tariffs. According to Moody, this visa-driven segment of the market has now dissipated.

“Much of our past sales in China were driven by visa buyers. That era is over. Those who were buying and shipping to China had to offload their stocks due to overaccumulation, which distorted the market significantly. Now, without that distortion, immediate sales are harder to come by, but we are hopeful that the quality of our clients and our wines will shine through,” he explained.

Wine importer Stanley is hopeful. “Australian wines have made a robust return. The enthusiasm is genuine, and we hope this isn’t just a passing trend but the start of sustained enthusiasm for Australian wines,” he said.