Australian luxury wine to China will take years to rebuild, says Treasury winemaker

SYDNEY: Chinese wine sales will not return to the same level for Australia's Treasury Wine Estate even if high tariffs imposed during a political dispute with Canberra are dropped, its chief executive said.

The world's biggest standalone winemaker drew a third of its profits from China before anti-dumping and subsidy tariffs of up to 212 per cent were imposed on Australian wine, effectively ending sales, in 2020.

Australia's trade minister met with his Chinese counterpart in Beijing last week seeking an end to all trade impediments as diplomatic relations improve, although wine tariffs remain in place.

Treasury is closely watching how the Chinese and Australian governments work through a process to resolve tariffs on barley, outside of the World Trade Organization, hoping the same path will be followed for wine, Treasury chief executive Tim Ford said on Tuesday (May 16).

The company had continued to invest in marketing the luxury Penfolds brand in China over the past three years, and supporting staff there to maintain relationships, despite making no profit, he told the Australia-China Relations Institute at the University of Technology, Sydney.

"Our brand awareness in China has gone up in the last two years on Penfolds," he said.

The biggest lesson learnt from the situation was that Treasury should have invested more in the local Chinese wine industry earlier, he said on Tuesday.

It was most likely tariffs would be dropped, although they could also be reduced, he said.

"This isn't going to be a big tap that gets turned on overnight for us. We don't have incremental wine sitting there ready to go at the A$100 above," he said.

"The A$30 level we would be able to start supplying to China pretty quickly, but it is going to take us two, three, four years to start building up the Australian supply," he added.

Many Australian wine growers had exited the industry, while in China, the luxury wine segment had shrunk, he said.

Treasury will not get back to China being a third of profit in the next six years without diverting wine from the other markets it had built to replace Chinese sales - "which we are not going to do", he said.

In February, Treasury said net profit for the first half through December jumped by nearly three-quarters to A$188.2 million (US$131.51 million) from the same period a year earlier, but below analysts' estimate.