The CEO of Australia’s Treasury Wine Estates has reportedly warned the removal of Chinese tariffs would not guarantee the recovery of wine exports to the country overnight.
Speaking at the Australia-China Relations Institute at the University of Technology in Sydney, Tim Ford was reported as saying it could take “two, three, four years” to rebuild supply to China when tariffs between the two countries are eventually dropped.
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“It’s going to take us two, three, four years to really start building up the Australian side of it again because we are not going to go back to where we were,” he said, according to Bloomberg. “This isn’t going to be a big tap that gets turned on overnight for us. We don’t have incremental wine sitting there ready to go at the A$100 [and] above [level].”
“The A$30 level, we would be able to start supplying to China pretty quickly but it is going to take us two, three, four years to start building up the Australian supply.”
Since the imposition of tariffs of up to 212% in 2020, the export of wine from Australia to the country has effectively ended. Treasury, which pre-tariffs drew a third of its profits from China, has been particularly negatively impacted, with global revenues down 9.3% in the year ended 30 June 2022.
The company, which is the largest standalone winemaker in the world, has continued to invest in its Penfold brand over the last three years, despite making no profits.
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By GlobalData“Our brand awareness in China has gone up in the last two years on Penfolds,” Ford reportedly said, adding it was clear the company should have invested more heavily in the local Chinese wine industry earlier.
In October 2022, Treasury launched its Penfolds country-of-origin range in China. The wine is sourced and made in the country’s Ningxia region in the north of the country.
Ford was part of a delegation of top business leaders from Australia who visited Beijing in the last month, in the latest sign relations between the two nations could be starting to thaw.
He said Treasury was watching how the Chinese and Australian governments work to resolve tariffs on barley in the hope that it could prove a blueprint for wine to follow.
The Treasury CEO added, however, that even if tariffs are removed the group’s profits in China will not recover in the next six years unless wine is diverted from other markets including the US and UK back to the country. This, he said, was not something the company was prepared to do.
