Beijing, China — While Beijing’s recent promise to lift the ban on Australian rock lobster offers hope for the seafood industry, other Australian products returning to the Chinese market are encountering significant challenges. The wine sector, in particular, continues to struggle despite the easing of trade restrictions earlier this year.
In March, China lifted the punitive tariffs that had virtually halted Australia’s bottled wine exports. This initially sparked excitement among winemakers, connoisseurs, and importers. By mid-2023, Australia had exported over $340 million worth of wine to China. However, the enthusiasm quickly waned. By July, exports had plummeted to just $38 million.
Beijing-based wine writer Jim Boyce, who runs the ‘Grape Wall of China’ blog, highlighted the gap between imports and actual sales. “I went to a local high-end store to see if any Australian wines were back on the shelves, and there weren’t any. The staff confirmed they don’t have them,” Boyce said. This discrepancy between rising imports and sluggish sales underscores the challenges facing the Australian wine industry.
A Shifting Landscape for Australian Exports
China’s trade war with Australia began in 2020, triggered by former Australian Prime Minister Scott Morrison’s call for an independent investigation into the origins of COVID-19. In retaliation, Beijing imposed a range of trade restrictions, affecting about $20 billion worth of Australian exports, including wine, barley, and red meat.
However, since Prime Minister Anthony Albanese’s government took office, many of these barriers have been lifted. On Thursday, Albanese met with Chinese Premier Li Qiang, announcing a timeline to reintroduce Australian rock lobster to China by the end of 2024, just in time for Chinese New Year 2025. Prior to the ban, Australian rock lobster exports to China were worth approximately $700 million annually.
While restrictions on barley and most red meat processors have also been removed, Australian wine has faced a much more challenging reentry into the Chinese market. In contrast, Australian beef exports have rebounded quickly, reaching key quotas six weeks ahead of schedule. Tian Zhang, CEO of AustCham China, noted that Chinese consumers have shifted towards beef, driven by concerns over pork safety and the relatively affordable price of Australian beef.
Wine Industry Struggles Amid Economic Concerns
In sharp contrast to the success of beef, Australia’s wine sector is encountering significant roadblocks. The Chinese economy, grappling with a slowdown, has resulted in reduced wine consumption. Jim Boyce remarked that wine consumption in China is now just one-third of what it was in 2012. “Wine is seen as a luxury, and in tough economic times, it’s often the first luxury to be sacrificed,” Boyce said.
Margaret River winemaker Mike Gadd, who recently visited wineries in China’s Ningxia province, echoed this sentiment. “There’s a general nervousness in the market,” Gadd explained. “Winemakers I spoke with all feel that it’s much harder to sell wine now. There’s a pessimism about where the industry is headed.”
Adapting to a Changing Market
In an effort to revive the economy, Chinese authorities have implemented several stimulus measures aimed at boosting consumer confidence, addressing the property crisis, and bolstering the stock market. These initiatives coincided with China’s Golden Week holidays, a time when hundreds of millions of people travel across the country. The stock market surged, with the largest single-day gains since 2008. However, the rally quickly cooled as expectations for further stimulus were not met.
While domestic tourism saw a significant boost during Golden Week, economists like Alberto Lebrón are cautious about the longer-term outlook. “The real challenges will come after the holidays when people may feel the need to save more money. That’s not good for the economy, which is already struggling,” Lebrón said.
Faced with a shrinking market, Australian companies are adapting. Treasury Wine Estates, the producer of Penfolds, has diversified its offerings to include wines from China, France, and the U.S., in addition to Australia. Their new product, “One by Penfolds,” is being sold on popular Chinese e-commerce platforms like Taobao, a move that capitalizes on China’s booming online shopping sector.
“China’s e-commerce expansion has defied expectations,” said Zhang of AustCham. “Australian wine producers are recognizing that while traditional channels may be difficult, the opportunities through e-commerce are just as significant.”
Looking Ahead
While Australian beef and barley have successfully reentered the Chinese market, the wine industry’s challenges reflect broader economic issues in China. As Beijing works to revive consumer confidence, the fate of Australian wine remains uncertain. The industry’s ability to adapt to new consumer trends and digital platforms will be key to its long-term success in the world’s second-largest economy.
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