China’s Trade War With Australia’s Wine Industry Has More Premium Bottles Coming to the U.S.
If you’ve noticed in past years that there seemed to be less Australian wine in your local shop and on restaurant lists than you had seen previously, you were definitely on to something. As American taste declined for the jammy fruit bomb style of wine that Australia, and especially Barossa Valley, had become known for, a thirst for wine heated up in China, and the Australian wine industry shifted its efforts. About 95 percent of the wine from Australia sold in China was red, and in the last 10 years the country has increased its vineyard acreage and output of Merlot, Shiraz, and Cabernet Sauvignon. Transferring its priority to China meant pulling product away from other markets, and when it came to wine, Australia had truly put all its eggs into the proverbial basket.
And then disaster struck. In April 2020, during the early stages of the global Covid-19 pandemic, Scott Morrison, who was Australia’s prime minister at the time, called for an investigation into the illness’s origin. Beijing considered this an insult, and in November 2020 the country struck back with a retaliatory tax on wine imports from Australia, causing what had become the country’s largest export market to dry up overnight. Currently, the duties are between 116.2 percent and 218.4 percent on bottled Australian wine imports in containers of 2 liters or less, which applies to all standard sized bottles and magnums.
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According to Deirdre Cook, Wine Australia’s marketing manager in the United States, Australia exported 121 million liters of wine valued at AU $1.3 billion ($870 million USD) to mainland China in the year ending October 2020, before the tariffs were put in place. Most of that was higher value red wines. In the year ending December 2022, this had dropped by a startling 99 percent in value to AUD $12.4 million ($8.28 million USD) and 98 percent in volume to only three million liters.
While an immediate about face and switch to developing new markets and shoring up older ones was complicated by the ongoing pandemic and supply chain issues, there are now more Australian wineries exporting to the United States than had been in more than 10 years, especially at higher price points, which is contributing to a more diverse premium category for American consumers. Looking at wines valued at $50 USD per bottle or more at retail, there has been 57 percent volume growth in the last year alone. This gain is mostly across still red wines including Shiraz, Cabernet Sauvignon, and Grenache, with more than two-thirds of exporters in this price band either just starting or continuing to grow their exports in this category.
Torbreck, a Barossa winery whose offerings in the U.S. include their ancient vine Runrig red blend, which retails for $225, exports to more than 45 countries worldwide. When the Chinese market completely dropped out, the winery was able to “reallocate wine and resources from China to those markets without great effect on our bottom line,” according to Andrew Tierney, Torbreck’s export director, who added, “our U.S. business jumped 27 percent from 2020 to 2022.”
Hentley Farm, an Australian brand that produces Clos Otto Shiraz, available stateside for $200, in addition to more accessible bottles, is just getting established in the United States thanks to participation in Wine Australia’s Market Entry program, a business matching program for wineries looking to enter the U.S. market. The project tripled in size to meet demand in fiscal year 2022, and wineries are now enrolling for next year’s program, with co-funding of participation costs from South Australia, Victoria, and Western Australia.
Keith Hentschke, Hentley Farms’ managing director, told Robb Report that although China had been a very good market for the company, they are now “trading in China at less than 5 percent of pre tariff levels.” He added, “We have since put almost all of our international marketing effort into the U.S.A. We see the U.S.A. as having large potential. . . We have now established about 10 new distributor relationships.”
Lauren Mudge, head of sales and marketing at Barossa Valley’s Seppeltsfield, informed Robb Report, “We have been proactively working with partners in the U.S., Canada and U.K. to develop new, strategic opportunities to showcase our brand.” With a series of single vineyard Barossa Valley Shiraz and Grenache and its “Centennial Cellar,” said to be the world’s longest unbroken line of single vintage Tawny in the world, dating back to 1878, Seppeltsfield is focusing its efforts “solely on-premise [restaurant] and fine wine retail channels only, not big supermarket chains.” That’s a good thing, because a 100-milliliter bottle of fortified Seppetsfield 1923 100-Year-Old Para Vintage Tawny retails for $1,650.
In addition to a large concentration of high-end reds and a handful of sweet, fortified wines in the market, you can expect to see more premium sparkling wine from cool-climate Tasmania, such as House of Arras Brut Elite and House of Arras Grand Vintage, which retail in the States for $50 and $130. Enrique Morgan, general manager of the Americas for Accolade Wines, which sells House of Arras sparkling in the United States, echoed the sentiment of other respondents, stating, “We are seeing strong distribution growth and retail penetration . . . and have locked in distribution across the U.S.” While Chinese tariffs on Australian wine were initially a big blow to Aussie winemakers, they have made the best of a difficult situation by targeting other regions including the United States. The enormous increase in choices of Australian wine already in the U.S. market or on its way is nothing but good news for those of us who love good wine.
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