As Australian trade officials try to negotiate a way out of trade disputes with China, many wineries across the country admit it’s time to find more reliable countries to do business with.
China’s decision to add an anti-dumping tariff of up to 212 percent on Australian wine – which went into effect last month – has seen wine exports to China fall 95 percent, according to initial estimates by the Australian Grape and Wine industry organization.
Australian winemakers are now looking to Great Britain and the United States as alternative markets, as tensions with China over the coronavirus pandemic force the industry to seek stability in 2021.
There are also calls to increase the popularity of Australian wine in parts of the developing world, particularly India, where the industry is hoping that signing a bilateral trade deal could help open the floodgates for a population in full swing. boom.
Taylors Wines in South Australia’s Clare Valley typically exports around 20% of its wine to China, but when four shipping containers full of premium red wine were stranded at a Chinese port in October, the company realized it had to start looking beyond China.
Mitchell Taylor, managing director of Taylors Wines, said the United States – where the company already exports small amounts of wine – was the best bet, given it was an established market with a margin. growth.
“While it’s a complex market in the United States, there is certainly a lot of loyalty for quality and a good brand of wine there.”
China has only been Australia’s top wine export destination since 2016, and in four years it has grown to account for 36% of Australia’s wine export earnings, according to IBISworld.
Previously, the United States was the main export market for Australian wine (followed by the United Kingdom), although traditionally the wines that sell best in the United States have been cheaper bulk wines rather than wines from boutique or higher quality.
“We really need to do more marketing in some of these very prestigious international markets, especially in the high end of the market to get this message across about the quality of Australian wine,” Taylor said.
Lee McLean, of the Australian Grape and Wine industry group, said America was more difficult to sell because Australian wine not only had to compete with strong domestic production in California, but also with other wine-producing countries.
According to Wine Australia, the value of wine exports to the United States in 2019 was $ 432 million, which is half the value of wine exported to China, or roughly $ 1.2 billion.
However, even if Australia increases its imports to America, this will not be on the scale of the demand seen from China in recent years – each year Australia sends over 130 million bottles of wine to China. .
“Chinese consumers really love Australian wine and are willing to pay a premium price too,” McLean said.
“It is therefore very difficult to transfer this type of quantity at this type of price to other markets.
“But if we’re prepared to make this sustained effort in countries like the United States, we’ll see the types of incremental growth we need to be profitable in the long run.”
Europe and UK
The UK’s withdrawal from the European Union, which officially began on Monday, has left the door open for Australia to sign new trade deals with the UK and the EU – and many wineries are hoping these agreements could be a short-term solution to the Chinese problem.
Negotiations for the Australia-UK Free Trade Agreement began in June, and now that UK and EU lawmakers have finalized their trade deals, Australian officials will soon seek to do the same.
Alister Purbrick of Tahbilk Winery and Vineyard in Victoria said a trade deal between Australia and Britain that reduced or removed tariffs would provide instant relief, given the popularity of Australian wine in the UK today. .
“Australia is still the number one country in terms of volume of wine imported to the UK, so it’s a very important market for us,” he said.
In the year ending June 2020, Australian wine exports to the UK were worth $ 383 million, according to Wine Australia.
“It can certainly increase quickly and significantly if the federal government can get us import duty relief,” Purbrick said.
“It would make a huge difference to our industry overnight because you would suddenly have a price advantage over your international competitors to help you increase your sales.”
Mr McLean said the wine industry was also closely following the Australia-EU trade talks, but stressed that these might not be as successful for wine exporters as the UK talks.
“In some of these traditional wine producing countries like France, Spain and Italy, it’s a tough problem to break,” he said.
“There is also Russia, which is a big economy, so we should look there for opportunities to see if we can export some of this high quality wine to Russia.”
Asia and Africa
Bruce Tyrrell of Tyrrell’s Wines in the Hunter Valley had a shock of a year.
He lost most of his 2020 crop to smoke damage from summer bushfires, months of cellar door income from COVID-19 closures, then also lost its Chinese customers.
About 25 percent of the wine it produces for the export market ends up in China. But despite the frustration, Tyrrell hailed the need to find more reliable countries to do business with.
“I think it will probably make us less dependent on China,” he said.
Mr Tyrrell said he believed the US and UK markets were worth expanding, but his strategy was to expand his exports to other Asian countries and create entirely new markets in Central Asia.
“We burned down our entire existing market in China and therefore looked for where we can expand distribution,” he said.
“So countries like Japan, South Korea, Taiwan, Indonesia and the Philippines are the main countries we want to work on, so we recently opened up Uzbekistan and Kazakhstan.
India is another area of growth, but the high duties and taxes on imported wine mean it is not yet too attractive a market for many producers.
The wine industry is calling on the federal government to finalize a bilateral trade agreement with India, known as the Australia-India Comprehensive Economic Cooperation Agreement, which has been underway for 9 years.
“India will be an important priority for us as it will be for a number of other agricultural industries, but the bottom line with India is that this is a proposal to long term, ”said McLean.
Australian wine exports to India were worth around $ 9 million in 2018-19 – far less than the $ 1.2 billion worth of wine exports to China.
But with a population of 1.3 billion – and with 700 million of those people above legal drinking age – India has the potential to be a huge market.
“We are also looking at India because we believe there is a growing population and a growing economy,” said Mr Taylor of Taylors Wines.
McLean also sees Africa as a growing market for decades to come.
“There are real business centers in East Africa, especially in places like Kenya, where there are likely to be opportunities not only from the business community of a growing economy, but also tourists, ”he said.
“This is a time when we have the opportunity to think outside the box and look at all the opportunities, not just the same types of markets that we look at year after year.”