Punitive tariffs on Australian wine in China have effectively closed the major market to local producers, an industry heavyweight says, as tensions between the two nations shows no sign of improving soon.
Treasury Wine Estates on Wednesday reported its interim results, showing earnings from Australian-made wine sold in China had plummeted froxjmtzywm $78.2m in the first half of fiscal 2021 to just $2m in the six months to December 30.
The numbers confirmed the wisdom of TWE’s strategy to focus heavily on the American and premium markets, divisions that both booked higher earnings, but overall net profit fell more than 5 per cent.
The company said sales of its flagship Penfolds brand were “particularly strong” in Asian markets outside of mainland China, while distribution also increased in Europe, the US, Australia and New Zealand.
Chief executive Tim Ford said TWE had moved out of a “recovery and restructuring” mindset to one of “growth and innovation”, and the results were pleasing considering “the effective closure of the mainland China market”.
“This performance reflects the focused execution of our plans and strategic priorities, led for the first time by Penfolds, Treasury Americas and Treasury Premium Brands,” Mr Ford said.
“Each division is now on a clear and positive trajectory towards their respective long-term growth objectives, with the benefits of separate focus and accountability already very evident.”
Shareholders were impressed by the turnaround, sending TWE shares more than 12 per cent higher to $11.87 in intraday trade.
In 2020, China accused Australian winemakers of “dumping” – selling below the cost of manufacturing in a bid to increase market share – and imposed an eye-watering tariff of 175.6 per cent for five years.
Australian beef, barley, lobsters and coal exports have also been targeted by China in the ongoing trade war – seemingly sparked by Australia’s ban on Huawei participating in building the 5G network and joining calls for an inquiry into the origins of Covid-19.
Australia has complained to the World Trade Organisation about the wine tariff and “anti-dumping” duties of 73.6 per cent on Australian barley.
Industry body Australian Grape and Wine said earlier this month that the closure of the Chinese market, freight shortages and a record 2.1 million tonne 2021 vintage had converged to create a concerning supply-demand imbalance.
“Many wine producers are approaching vintage with significantly higher than normal inventories and full tanks,” it said.
