Without China, What Now for Australian Wine Exports?

A new tariff in China has local winemakers scrambling to find alternative export markets.

Article by Jane Rocca

(Photography by Maksym Kaharlytskyi)

The Barossa region, about an hour’s drive north of Adelaide, is home to some of Australia’s best-known wineries, including Penfolds, Henschke, Seppeltsfield and Schild Estate. The latter is prized for its shiraz, which wooed palettes across China until a new tariff stopped trade in its tracks.

In November, China’s commerce ministry announced that Australian wines entering its ports would be subject to a temporary tariff ranging from 107 per cent to 212 per cent. The announcement followed allegations that Australia has been “dumping” subsidised wine in China, destroying the local industry.

Since the tariff came into play, exports have dropped 98 per cent, halting a trade worth $1.2 billion annually to Australian winemakers.

Sue Henderson, the CEO of Schild Estate, says the wine industry is caught in the middle of an international trade dispute that has little to do with importers. While Schild Estate primarily relies on Australian sales, China’s appetite for Barossa wine was a welcome boost.

“Sadly, governments are using political pressure through trade to be heavy-handed with each other and we’re in the way,” Henderson says. “The Chinese market was very profitable for us. We spent a significant amount of time over the years visiting China and nurturing good relationships. They’re very fond of our wines but now [have] no incentive to buy it. They’re flabbergasted by the situation but not allowed to say anything.”

James March, the CEO of the Barossa Grape & Wine Association, says China is Australia’s largest export market, with the Barossa exporting 60 per cent of its annual vintage to China (the remainder stays in Australia). Now the region known for its deep red wines is hoping to expand its presence in New Zealand, the UK, the US and Canada.

The association is known for its biennial wine auction, held in conjunction with the fine wine seller Langton’s (this year’s event will be held from April to May, in the Barossa, Sydney and online). In the past, the auction has been the domain of Chinese investors, who help to push up prices for the prestigious Penfolds “Bin” lots. In 2019, a Chinese businessman purchased a six-litre bottle of 2013 Penfolds Grange Imperial Shiraz for $58,250. Who auctioneers will sell to now remains to be seen.

The collectability of its wines and guaranteed provenance puts the Barossa in good stead. “We have buyers interested from Hong Kong, Taiwan, London and the West Coast of America,” March says, “and many who bid online, too, so the market is open to everyone. While in the past few years we’ve seen an increase of interest from China, there’s others keen to purchase, too.”

(Photography by Jozse Hocza)

March’s association is working hard to help winemakers land lucrative accounts overseas and has a renewed interest in the US markets in California, Texas, Florida, Illinois and New York. The association is also working with the international non-profit organisation GuildSomm to lure American importers.

The winemaker Cath Oates, from Oates Ends in Margaret River, was in the final stages of arranging a Chinese export deal when the tariff politics played out. She has her eye on the US market but says Australia needs to convince America that there’s more to our industry than Yellow Tail.

“Australian wine has some work to do there in terms of lifting our image,” Oates says. “Wine intelligence data suggests we make fun, cheerful wines, but we are so much more than that.” Oates says her strategy is to take her chardonnay and reds to an educated, premium-wine market in a few key US states, targeting those who desire top-end wine.

The CEO of Seppeltsfield, Steven Trigg, is also looking to pivot to other markets. The company’s owner, Warren Randall, travelled to China 39 times in eight years to secure export deals for Seppeltsfield. Now they’ve all but vanished. And while tariffs have not been imposed on 24,000-litre premium bulk wine imports (which made up part of Seppeltsfield’s sales) the message is clear: don’t risk it.

“The importers in China aren’t taking the wine from us because they are told it won’t clear customs,” Trigg says. The Chinese market accounted for 15 per cent of the company’s business but all is not lost, he says, thanks to the Australia-United Kingdom Free Trade Agreement. “There’s tremendous optimism about the UK,” says Trigg, who is also exporting smaller volumes to Japan, Vietnam and Singapore.

In October, Seppeltsfield signed with US distributor Legend Imports, run by the American husband-and-wife team Jonathan Ross and Jane Lopes. The company believes that success in the American market depends on having a distributor that has visited the winery, knows the product and has connections in the US.

Darren Rathbone, the CEO of Rathbone Wine Group, which includes Yering Station in the Yarra Valley, Mount Langi Ghiran in the Grampians and Xanadu in Margaret River, says there is no hard and fast solution. Rathbone has been selling to China since 2007, with 20 per cent of his business coming from Chinese sales. Now there are no transactions happening. “When the tariffs came in, we saw a short-term increase of sales in China of stock already in their market,” Rathbone says. “We enjoyed it while it lasted but now we’re kind of trapped, trying to figure our best way forward.”

Thailand is his second largest export market, but it’s been severely impacted by the pandemic, with the closure of resorts that stock Australian wines. It’s a similar story for the New York restaurants that usually pour his wine: they’ve been operating at 25 per cent capacity. “We have to remain optimistic,” Rathbone says. “But it’s a tough time for any winemaker, with no real end in sight just yet.”