Australian wine giant Treasury Wine Estates is cautiously adjusting its global shipments of its popular brand Penfolds in anticipation of China’s tariff removal, as relations between the two countries improve, the company has revealed.
“We’re going to plan to ship more in the second half in totality, just to give us the flexibility should the situation change with China over the next four or five months … It’s about giving ourselves the flexibility about how we allocate over the course of the full year,” said the group’s chief executive Tim Ford on Tuesday when announcing its 2023 financial results.
Should the tariffs end, the group’s cheaper wines such as Penfolds Max’s could land in China as soon as six weeks after the removal, but its luxury range of wines priced over AU$100 would take more time.
TWE’s net profits in financial year 2023 dropped by 3.3% to AU$254.5 million compared with previous year and its revenue also slid by 2.2% to AU$2.4 billion.
The new hope raised on wine came after China swifty dropped 80% punitive tariffs on Australian tariffs this month following Australia’s complaint withdrawal from WTO.
Prior to the China tariff in 2021, TWE was the biggest Australian wine exporter to China, and the two countries’ annual wine trade amounted to AU$1.2 billion, according to data from Wine Australia.
However, the optimism in reopening China market is tapered by a sobering report from Rabobank. It warned that even if China lifts tariffs on Australian wine, the wine glut facing Australia could fill up 859 Olympic swimming pools and would take at least two years to deplete.
If the tariffs were to remain in place till 2026 as Chinese government originally announced, it would take four years for the industry to return to balance, the report adds.
Meanwhile, China’s overall consumption is also contracting. Total wine consumption last year was more than halved from its peak in 2017 as we have written and visualised here, adding more uncertainty to Australian wineries that are hoping for a fast turnover in the local market.
