Australian winemakers are making preparations to re-establish their foothold in the Chinese market amid rising hopes that Beijing will remove trading restrictions on Australian wine imports.

On Sunday, Prime Minister Anthony Albanese confirmed the government hadstruck a deal with China that would see an “expedited” five-month reviewinto its hefty import duties. In return, Australia will suspend its World Trade Organisation challenge.

Bottles of wine imported from Australia are displayed for sale at a supermarket in Nantong Free Trade Zone

Australian Grape & Wine Association chief executive Lee McLean said the Chinese government’s decision to review its punitive tariffs had instilled “a sense of optimism” among its members. The China market was worth $1.2 billion for Australian winemakers at its peak.

“We’re really, really pleased that we got to this point,” said McLean. “Over the last sort of six or 12 months companies have been stepping up their engagement with Chinese customers again. So [there’s] a little bit of planning going on, I would imagine.”

The association chief, who was in Shanghai last week to meet counterparts in the Chinese wine industry, added that wine producers remained cautious given there was more work to be done as China begins its review process.

“We can’t pre-judge any sort of outcome here, we can’t put the cart before the horse. We need to make sure we are engaging in good faith on behalf of the industry in providing the information to the process that’s required.”

As part of China’s review process, McLean will engage with the wine industry to prepare a submission to present to the Chinese Minister of Commerce, the state agency responsible for the import duties regime.

The nation’s largest winemaking company, Treasury Wine Estates, said on Monday it was well-placed to rebuild its business in China. Its confidence was welcomed by investors and analysts alike, with the Penfolds maker’s share price closing 1.36 per cent higher at $11.93.

Treasury Wine created a ‘One by Penfolds’ sub-brand, which encompasses grapes from France, the US, and China.

Treasury said it would continue with its existing multi-origin strategy, in which it grows wine from Bordeaux, France and Ningxia, China, as well as Australia; rebuild distribution to China, reallocate some product from other global markets; and invest in marketing to ramp up Penfolds distribution in China.

“We now look forward to a new era of positive engagement that ultimately will build a strong and growing China wine category should the review see the removal of these tariffs,” said chief executive Tim Ford.

Goldman Sachs analysts estimates Treasury Wine’s revenue from its China business for the 2024 financial year will be $70 million and projected to climb to a pre-tariff sale peak of $400 million in the 2027 financial year.

“While we do not change these assumptions today, given tariff reviews are still ongoing, confirmation of tariff removal could see pull-forward of reaching back to A$400mn pre-tariff sales earlier than current assumptions,” wrote Goldman Sachs analysts Lisa Deng and James Leigh in a note.

UBS analysts said the news was welcome for the wine industry and for Treasury Wine, but noted the timing of the tariff removal was later than expected: the barley review took three months, whereas the wine review will take five.

“The reasons for barley duties to be removed – barley being supply constrained and being a feedstock into Chinese industry (e.g. beer) – arguably do not apply to the wine industry. In the event duties are not removed after five months ... we see a risk to Treasury Wine earnings,” UBS analysts wrote in a note.

Accolade Wines, the nation’s second-largest wine producer, said the review was a “clear signal” of “positive momentum” in Australia and China’s warming diplomatic and trading relationship.

“While there remain a number of steps before any relaxation of tariffs, Accolade is optimistic about the possibilities for our business, the suppliers we work with around Australia, and the industry more broadly given historic demand for Australian wine among Chinese consumers,” said Accolade Wines Asia managing director Sean Cunial, noting that the Chinese market has changed significantly since tariffs were introduced.

“Whatever the outcome of the review, however, we remain committed to working with industry and customers to rebuild the presence of Australian wines in this important market.”

Riverina Winegrape Growers chief executive Jeremy Cass：I reckon if we got half of [the market share we had] before, we should thank our lucky stars and be happy for that

McGuigan and Tempus Two maker Australian Vintage, which has had a challenging year and is conducting a strategic review of its business, have also embraced the news of China’s tariff review.

“We have been proactive ahead of the anticipated China opening, with multiple market visits and working closely with our valued partners. Next will be finalising the detail and going live over the next few months. China re-opening will deliver upside to our business as we anticipate growing our share of market,” said chief executive Craig Garvin.

The company will continue to focus on its core markets of Australia and the UK, whileeyeing Indiaand the Middle East as target export markets in the long term.

Riverina Winegrape Growers chief executive Jeremy Cass said there had been initial confusion among some grapegrowers who thought the tariffs had been removed completely, and said while the news of the review was welcomed, it wouldn’t be a quick fix.

In the two years since the tariffs kicked in, the wine sector hasgrappled with an oversupply of red wine; Chinese consumption of wine has declined; and new markets such as France and Chile have increased their market share in Australia’s absence. Grape growers haveexited the industryin droves as the cost of production way exceeds the price of grapes.

“We definitely welcome China coming back to the table with open arms, and it’ll definitely help. But it’s not going to be the quick fix that everyone thinks it is,” said Cass.

“I reckon if we got half of [the market share we had] before, we should thank our lucky stars and be happy for that.”