What is the current status of Australian fine wine producers in mainland China following the removal of the damaging tariffs that have been in place since 2020?
By
Edward Ragg MW and Fongyee Walker MW
This March, after much anticipation, the Chinese government lifted the 2020 tariffs on Australian wine. In January, during our visit to South Australia with students, the wineries seemed absorbed in conversations about the possible tariff lifting and were eager to gauge the extent of new orders, as many were also seeking new importers and distributors.
Before the dramatic decline of Australian wine in China, mainland China was Australia’s leading export market by value. Treasury’s Penfolds was a favored brand among Australian fine wines, accompanied by other esteemed labels, especially those from renowned Australian families or recognized in the Langton’s Classification, enjoying a sort of cult status. Notably, just before 2020, Australia had surpassed France as the foremost country of origin for imported wines in the mainland Chinese market.
During a trip to Australia, one student unexpectedly revealed her disinterest in visiting both Penfolds’ Kalimna and Magill Estates. We believed these locations were essential stops for a group from mainland China eager to explore the prestigious brand and learn about the nuances of Australian wine history. However, during dinner at Magill, a particular inquiry shed light on her hesitation. She asked if it would be possible to sample a genuine bottle of the Bin 407 Cabernet. This wine was not on the list, as the Penfolds team showcased select barrels, including the 2010 St Henri and 2010 Grange. The rise of counterfeit bottles, particularly of the two Bin wines commonly used for business gatherings and gifts in China—Bins 407 and 389—prompted this request. Eventually, a bottle of 2009 Bin 407 was presented, its authenticity beyond question, leading to a revelation for the guest who was previously “Penfolds-wary.”
This story prompts intriguing discussions about the revival of Australian fine wine in China as we emerge from the pandemic. With an economy facing challenges and real-estate markets plummeting, plus a perceived drop in consumer interest in wine, the situation raises concerns. How do we measure the recovery of Australia—sometimes seen as a figure of eight—against what is termed the Penfolds effect? Are other Australian fine-wine brands benefiting from Penfolds’ strength, or will they carve their own paths as they return to the market? Additionally, not all individuals within Australia’s fine-wine sector are rushing to reconnect with China; however, many are optimistic about new potential opportunities.
Indeed, Penfolds has made a strong re-entry into Beijing, recently launching the Penfolds Collection in the Chinese capital on the eighth day of the eighth month. Before Peter Gago’s masterclass—which featured the second vintage of the CWT Chinese Winemaking Trial Cabernet Marselan sourced from Yunnan and Ningxia—there was a luncheon highlighting vintages such as Yattarna, Bin 150 Marananga Shiraz, and RWT Shiraz, alongside the newly introduced 2021 Bin 180 Coonawarra Cabernet/Shiraz, celebrating Penfolds’ 180 years in operation. Gago noted that larger formats of this commemorative wine were already sold out, yet he did not disclose if any had been purchased by buyers from mainland China. A contact in Sydney later informed that the Jéroboams of Bin 180—priced at A$18,000 each—had indeed been sold out. One cannot help but wonder who the buyers were.
Earlier in May, we engaged with some of the high-ranking officials from Treasury during our visit to Hong Kong. We spent an entire day tasting select vintages of the Bin 407 and RWT Shiraz, guided by Andrew Caillard MW and Peter Gago, as part of a panel for the upcoming 9th edition of The Rewards of Patience. The atmosphere was certainly upbeat, yet there lingers a sense of concern that the market in mainland China may not recover as swiftly as hoped, even for established brands like Penfolds. Moreover, Treasury has been strategically streamlining its portfolio, having recently sold off Wolf Blass.
In many ways, Treasury and other players in the Australian fine-wine sector, particularly those with significant volume, are counting on China’s market recovery and are strategizing for the distribution of the abundant 2024 vintage. Starting July this year, Treasury has increased prices on the Penfolds Bin and Icon ranges and has also reportedly constrained production during the tariff phase. While Wolf Blass is no longer part of their offerings, it is important to note Treasury’s efforts to attract entry-level consumers through products like Penfolds Max (188RMB) and Penfolds One (278RMB), as well as the Bin 28 Shiraz (288RMB) and the more upscale Bin 389 (488RMB), all conveniently available for delivery to homes or restaurants via the Hema supermarket app.
It’s essential to remember that despite the reduced volume from countries like Chile in mainland China, Australia is seemingly re-entering a competitive arena. Wines from the Errázuriz collection and Viñedo Chadwick, along with Gandolini and the increasingly sought-after fine wines from South Africa, are actively competing for market share.
By keeping a close watch on the developments in the sector, we may gain insights into who will emerge in this unique market—one that seems to resemble breakdancing more than figure skating.