Following China’s investigation into Australian wine that could put Australia’s billionaire dollar wine trade at risk, a report by Westpac bank in New Zealand is now warning of the island country’s high vulnerability to China, currently its biggest export market.
The report published by Westpac highlighted a few key export sectors that are most at risk if relations between China and New Zealand took a turn for the worse, but consoled that New Zealand’s wine risk is “very low” unlike tourism, seafood and education.
The two countries’ bilateral trade stood at NZ$33.4 billion in 2019, with majority of New Zealand’s exports to China being dairy products, wood, meat and travel services, according to data released by New Zealand government.
Meanwhile, wine exports to China only account for less than 1.5% of New Zealand’s overall wine exports, according to Westpac, essentially reducing New Zealand wine industry’s dependence on China.
Additionally, the report noted that Chinese wine drinkers’ preference for red wines might have inoculated New Zealand from future risks given its Sauvignon Blanc dominated exports.
“New Zealand’s concentration on Sauvignon Blanc means the sector is underweight in the Chinese wine market relative to its global market share”, the report says. “If anything, the New Zealand wine industry would like to increase its exposure to the Chinese wine market, given the broader rapid growth (both experienced and potential) in household expenditure on luxury items like wine.”
Echoing Westpac’s finding, Philip Gregan, CEO of New Zealand Winegrowers, also dismissed fears of a similar threat on Kiwi wines. In an email reply to Vino Joy News, he stated, “As the Westpac report notes, New Zealand’s wine exports to China are small but growing, and we do not believe that New Zealand wine would be a target.”
Interestingly, he notes in its top export markets in the US, UK, Australia and Canada, Sauvignon Blanc dominates, whereas in China red wines are outperforming whites.
“In China, our exports are split more evenly between red and white, with Pinot Noir, Merlot, Cabernet and Syrah until recently making up the lion’s share,” says Gregan.
Despite the fact both New Zealand and Australia enjoy zero wine tariff thanks to Free Trade Agreement, New Zealand lags far behind its Australian neighbor in Chinese wine market, partly because of its production limit, which makes up less than 1% of world wine production.
Australia on the other hand is the world’s 6th biggest wine producer and accounts for roughly 40% of imported wines sold in China, while just less than 2% for New Zealand.
Acknowledging the gap, Gregan adds New Zealand’s lukewarm reception in China is also due to the fact the country “has never looked for high volumes, instead focusing on offering premium, sustainable and diverse wine styles,” he explains.
Nonetheless, the trade official relished about Kiwi wines’ growth in the past few years, and is buoyed by the sector’s recent encouraging performance in the first half of the year.
“While in 2020 we, like most countries, have seen exports to China suffer, according to CAWS data for Jan-Jun 2020, we have outperformed the market.
“In addition, as market trends shift to increased consumption at home, aided by the widespread acceptance of e-commerce, we have seen a marked increase in Sauvignon Blanc exports. This demonstrates that white wine drinkers in China are drinking for enjoyment, and we believe this trend will continue to grow, with NZ well-placed to benefit,” he opined.