Australian Wine Finds its Feet in China

Australian wine is pouring into China three-and-a-half years after being pushed out by tariffs as high as 218 percent.

As producers seek to regain top spot in this post-tariff era, they are attending fairs like Vinexpo en masse, joining promotions by bodies like Wine Australia and finding new partners – De Bortoli officially launches with veteran importer ASC this month.

They face a steep climb.

Australian exports to China fell 99 percent from 121 million liters worth $865 million in the year ending October 2020 to 1.4m liters worth $6.6 million in the year ending December 2023, per Wine Australia. That shift from mountain to molehill saw the number of exporters go from 2400 to just over 100.

While China Customs stats for April show Australian imports rose to $10.4 million from a mere $126,000 year on year, it is a single step on a long journey to the top.

Market changes

Even beyond the tariff woes, China’s shifting wine scene has done Australia no favors.

“Australian wines still have good potential because they are strong in quality and marketing capacity, but they face a changed market,” says Ma Huiqin, professor at China Agricultural University in Beijing.

For one thing, everyone is fighting over a shrinking pie as imports are less than half of 2019 levels and local production significantly dropped. For another, the big red wines associated with Australia were often for gifting and banqueting – struggling niches – while consumer tastes are changing.

“They need to first fight to take back market share and they need to focus more on new consumers,” says Ma. “They need to feed the trend of more white and light-bodied easy-drinking wines.”

Shifting tastes

Andrew Moody of Tyrrell’s Wines saw this trend at Vinexpo in Hong Kong in late May.

“We had come to Vinexpo prepared with more red wine samples than white, but next time we will probably come with a fifty-fifty balance, or even more whites than reds,” says Moody, noting it plays to Tyrrell’s strengths.

“This gives us a lot of hope as we are strong in whites, especially our Semillon, Chardonnay and Verdelho from the Hunter region,” he says.

Matt Bahen, GM of North Asia sales for De Bortoli, also recognizes the changing landscape.

“I feel like a stranger,” he says of returning after three years. The first steps for De Bortoli are restocking warehouses and gauging the market, although he already sees trends beyond Australia’s big reds.

“The strong position our new partner ASC has taken with Pinot Noir and sweet wine, our flagship Noble One in particular, that to me is encouraging,” he says.

France factor

Although China’s wine market has shrunk, competitors have strengthened their positions versus Australia, with France retaking top spot.

“I think it’s very good sign Australia is back because they have a lot of money to invest and bring new consumers into imported wine,” says an importer of French wines with nearly 20 years of China experience.

He sees threats, including Penfolds taking “a lot of market share from Bordeaux, from classified growths” as well as short-term cash flow shifting to building Australian wine stocks.

But he thinks France will otherwise hold its own, notably due to Burgundy and Languedoc, with the latter’s more permissive wine-making rules, wide range of grape varieties, large volumes and low prices positioning it as “the next region of France to win the market.”

China factor

The same holds for local producers. Their hopes of replacing Australia after the tariffs did not come to fruition but they are gaining ground as they pile up contest medals and high scores.

“The quality has improved and overall prices are less than in 2019,” says Professor Ma.

She cites the recent release of a wine, themed on a TV drama about Ningxia’s wine industry, called Hometown of Stars.

“The cost is RMB288 [USD40] for six bottles and it is pretty good quality.”

Local wines are also diversifying, in line with consumer demand, and benefitting from growing interest in quality homegrown products.

Size matters

The big questions, of course, are what Australian producers are keen on returning and to what degree.

For a producer like Treasury Wine Estates, with its iconic Penfolds brand, China is too big to ignore. The company has remained active the past four years with everything from product launches to scholarship programs to made-in-China wines.

Others face a wide array of concerns beside the new market realities listed above. How to balance alternative markets they developed the past three years. What exposure to future potential tariffs is acceptable. And for some, the existential crisis of overcapacity at home and slow global sales that even a major China boost cannot overcome.

For Pran Wines CEO Baron Hong, which sells labels from sources like Jasper Hill, Teusner and Sanguine, a major issue is sourcing enough premium product.

“Some cult wineries have had to allocate quotas from other export markets to us and quantities are very limited,” says Hong. “In some cases, once the first batch is gone, we must wait until the next vintage release.”

Hong says a shift to premiumization means some clients stopped making the entry-level wines that helped him penetrate the market.

He also foresees smaller Australian producers struggling with the ever-sophisticated marketing environment in China, from dealing with KOLs to managing a vast range of sales outlets, both online and offline.

Promotion strategies

Of course, producers are not just returning to China solo but also teaming with fellow wineries to represent the country or a region.

“In terms of promotional activity, it’s all about awareness-building,” says Bahen. “It’s a complete reset.”

Australia has certainly been conspicuous in recent weeks.

A Wine Australia pavilion of 70 wineries, including Vasse Felix, d’Arenberg and Parker Estate, featured at Vinexpo. A ProWine-backed New South Wales Roadshow visited Shanghai. And recent trade fairs like Wine to Asia in Shenzhen and TopWine in Beijing saw a boost in Australian brands.

That is just the start.

Take Wine Australia: along with providing technical support and market research, it is organizing a four-city China Roadshow in August and a ProWine Shanghai presence in November, says Hannah Bentley, senior communications manager.

Beyond promotion, the Australia brand as a whole also faces legacy challenges. One is a proliferation of knockoff labels, particularly Penfolds, that continued throughout the tariff era. Another is an unknown amount of wine of unknown quality sitting in bonded warehouses for years and now poised for release.

Pleasing palates

In sum, the China market is fraught with challenges. In other words, what else is new.

And in the midst of it all, a palate-pleasing tasting in Beijing last week of Bec Hardy wines with that soft ripe fruity telltale Australian style.

Today’s trends justify diversifying Australia’s offerings in China but that tasting said don’t forget what first attracted many to the nation’s wines.

This is something Bahen witnessed on recent visits to Guangzhou and Hong Kong.

“I always thought it was a bit of hubris to say our wines served the palate best,” he says. “But actually, we’ve been seeing it, there’s been very favorable comments about just that Australian style, about that lovely fruit-forward soft round character of our wines.”