Prior to joining Naked in 2016 as a winemaker, I had been heavily associated with Chinese interests investing in Australian wine companies and purchasing Australian vineyards/wineries for the better part of a decade. I can currently say I am an independent winemaker with no dealings with Chinese exports or Chinese interests and have been for some time; in fact it is part of my story and how I ended up with Naked Wines. However, I am supportive of their role and contribution to the Australian Wine industry.
Having been so heavily involved in this space, I am often asked for my opinion, so here it is;
The current tax environment for wine exporters to China is very difficult but it’s by no means devastating, nor is it necessarily permanent. China has clearly indicated the tariffs are anti – dumping measures linked to the dumping investigation which is currently underway. It is a response from the local Chinese industry who say they can’t compete against Australian wine in their own domestic market.
So from November 28th, China imposed tariffs on Australian wine to the tune of 107 to 212%. Having exported to China, I can confirm it is a very competitive market and distribution and listings are won and lost on the tightest of margins. Why is this an issue for the Australian wine industry? Many of our competitors; France, Chile, New Zealand, don’t need to pay this tax, so it will be prohibitive for us to compete. It has been estimated that a potential tripling of wine shelf prices will translate to an overall decline of 8.7% in sales revenue according to peers. China accounts for 36.7% of our wine export revenue ($1.2 billion annually). It’s a lot of bloody wine with no home!
So until Australia and China make up and the tariffs are removed again, we are in for another tough vintage or two. There will be pain, wineries will be push to the brink and some will not survive.
However, the great thing about the Australian wine industry and the diverse people that make up the tapestry is that we are tough, resilient and an innovative bunch. It’s not the first crisis we have faced (aka vine pull, drought, wine lake, bush fires, currency parity etc.) and it will not be the last.
So where to from here?
The industry will do what we have been doing for the better part of a century, develop new or expand existing export markets. Canada is a good alternative because it recently removed trade barriers, making Australian wine more accessible to Canadian consumers. It’s a large and very traditional market and its consumers are, like us, very well informed about wine.
British thirst for Australian wine could save us from the harmful effects of tariff protection. There are calls from London for Australian wine producers to send their bottles to Britain in light of these Tariff measures. As Britain approach Brexit they are appreciating their colonial friends again.
India is exciting (albeit a small market), having been at the coal face with China’s growing thirst for Australian wine, I see many similarities with India’s burgeoning market. With a young population, increasing urbanisation and the perception of wine as a ‘status choice’, India has parallels with other Asian markets where there is a growing acceptance of and preference for wine among the upper and middle classes.
Unfortunately wine exporting to new countries and finding new importers takes time and money. So until these markets are established or increased, there is a lot of wine with no home and it will find its home here on Australian shores. The domestic market is saturated with great wine at relatively good price points, much of the wine that is exported to China is too cheap and cheerful for the domestic market or conversely simply overpriced. I know that I don’t buy $100 bottles of wine for dinner every night.
So it is expected a lot of this wine will wash up on our domestic retail shelves, pushing down prices as retailers take advantage of the pain in the industry. However as you are aware, Naked is a different kind of retailer and has publicly announced three key commitments designed to support quality Australian independent winemakers and positively influence Australia’s wine industry:
1. Not to drop winemakers and chase cheaper wine
2. Offer fair pricing to winemakers so they can continue to be profitable
3. Launch a $5 Million Winemaker Rescue Fund
So Angels thank you for supporting a company that is making a significant difference in these challenging times, as your support of Naked Wines allows them to support many more talented Australian independent winemakers to make great wine at a fair price with the certainty of sale and payment.
To learn more and help, #StoptheSqueeze on your socials. Join Naked Wines in getting behind independent Aussie winemakers impacted by tariff hikes.
Find out how here https://www.nakedwines.com.au/stopthesqueeze
Stay safe and have a wonderful break and happy New Year full of great independent wine -Jp