Treasury Wine Estates, the Australian wine giant that owns Penfolds, says it’s “prepared and well placed” to resume shipping of its wines including Penfolds Bin and Icon series to the Chinese market once Beijing completes tariff review as soon as next month.
In its latest interim report to investors and analysts yesterday, the company says it’s ready to re-establish distribution for Penfolds entry-level wines, and divert allocations for Penfolds Bin and Icon series to China, should a positive outcome be reached in March.
In the six months ended on December 31, 2023, the company’s revenue remains unchanged at AU$1.28 billion but its EBITS was down by 5.8% during the period to AU$289.8 million. The decline as the company explains was attributed to its intentionally planned delay of shipments towards the second half of F24 for Chinese market when Beijing opens doors to Australian wine again.
“We remain confident that China will continue to be an attractive Luxury wine market and a significant growth opportunity for Penfolds over the long-term,” says the company in the report, which owns brands including Penfolds, Wolf Blass and most recently DAOU Vineyards in the US.
Beijing has been conducting a tariff review on Australian wine amid warming ties between the two countries, and the result is expected to be announced in March following a five-month expedited review.
Previously prior to the tariffs, China counts as TWE’s most lucrative export market, thanks to the popularity of its flagship brand Penfolds. The market contributed 30% of TWE’s profits before China slapped up to 218% anti-dumping tariffs on Australian wines in March 2021.
Despite the tariffs, Penfolds still retains unique appeal with Chinese consumers, ranked as the second most known imported wine brands in the country. Its flagship store achieved No. 2 ranking on Tmall and No. 3 ranking on JD.com during the recent Double 11 festival.
Before the tariffs, Australia was exporting AU$1.2 billion worth of wines to China. The export value has now plunged to AU$5 million, thanks to the hefty tariffs.
The nosedive worsened Australia’s existing wine surplus problem.
An earlier report by Rabobank warned that even if the China wine tariffs were removed and exports resumed, it would still take Australia’s wine industry at least two years to work through its current wine surplus, the equivalent of 2.8 billion bottles of wine.
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