After Australian wine industry lost out AU$1.2 billion annual wine exports following China’s hefty tariffs, Penfolds boss confessed one of the biggest lessons is not investing in Chinese local wine industry earlier.

Chief Executive Officer of Treasury Wine Estates Tim Ford made the comments at an Australia-China Relations Institute event in Sydney.

Tim Ford, CEO of TWE (pic: TWE)

Speaking at the event, he said it will take years to rebuild China market even if Beijing drops hefty punitive tariffs on Australian wines amid signs of thawing relations between the two countries.

Relations between China and Australia soured after the start of the pandemic and in March 2021 China officially imposed 218% tariffs on Australian wines, effectively upending the country’s AU$1.2 billion worth of wine exports.

This year relations between the two trading partners began to thaw. Ford himself was among business representatives on a delegation to Beijing last month. There are talks of dropping the tariffs as early as this June but for the Penfolds boss, even without the tariffs it would take years to rebuild local Chinese market.

“It’s going to take us two, three, four years to really start building up the Australian side of it again because we are not going to go back to where we were,” Ford said at the event.

Prior to China slapped up to 218% on Australian wines, TWE counts one third of its profits from China and about a quarter of premium Penfolds are shipped to the market.

During the pandemic, the company has continued its investment and support for local staff and operation in China. Its brand awareness has gone up as a result, said Ford but he confessed these efforts had made no profit so far.

He revealed one of the biggest lessons learned from the situation is not investing in Chinese local wine industry earlier, according to a Reuters report.

As Chinese taste buds mature for imported wines, DBR Lafite, Pernod Ricard and LVMH have all invested in local wine projects. Penfolds, despite its enormous success never followed suit until it was hit with tariffs.

Last year in order to sidestep tariffs it released for the first time its made-in-China Penfolds, which sourced grapes from China’s northwestern Ningxia and it is not ruling out launching more Chinese Penfolds in the future, as we have reported.

But for resumption of wine exports, it would be hard to allocate premium Penfolds to the market immediately since Penfolds has diversified its markets ever since, but for wines in the AU$30 range, it can supply the market pretty quickly, says the CEO.