China’s Easter gift to the Australian wine industry came not in the form of moulded chocolate, but a swipe of the legislative pen that removed punitive tariffs on its products of 200 per cent or more.
As of Good Friday, the three year old impost was removed, re-opening a trade route that at its 2019 peak was worth almost $1.2 billion annually.
Australian wines again are subject to zero Chinese tariffs, the result of a free trade agreement inked in 2015.
“In view of the relevant wine market conditions in China, it is no longer necessary to impose anti-dumping duties and countervailing duties on the imports of the relevant wines originating in Australia,” Beijing’s Commerce Ministry proclaimed.
In turn – and in the spirit of glasnost – Australia will discontinue World Trade Organisation challenges to the wine (and barley) imposts.
The references to anti-dumping aside, the tariffs were part of a broader imposition on $20 billion of Australian imports including coal, barley and – unofficially – lobsters.
The duties were applied in 2020 and 2021,when relations between Beijing and the then Morrison government were at a low ebb.
Since then, the Albanese government has prioritised improved relations – and trade – with China. While the Good Friday announcement was expected, it was nonetheless welcomed by Australian vignerons at a time of ratcheting input prices.
However industry figures warn that resuming trade will be a slow burn, with the absence of Australian wines in Chinese shelves opening the market to drops from Chile, Italy and Spain.
China’s property-centred economic difficulties also mean the nation’s wine consumption generally has slowed.
The South China Morning Post reports that Chinese wine consumption in 2023 was barely one quarter of its peak levels of 2017, with import volumes shrinking by one quarter (no surprise given the Australian wine ban).
At the same time, more domestic and global players have crowded into the market, with more non-vinous alcoholic drinks on offer.
“It’s going to take time for us to rebuild our presence in the market,” says Lee McLean, CEO of the industry body Australian Grape and Wine.
“It’s going to look a little bit different but I think with the right amount of work … we are looking forward to getting back into the market.”
Winemakers concur that the restorative process won’t be overnight and that the 2019 peak levels may not be reached again. Pre 2019, Australian wines accounted for almost 30 per cent of Chinese wine imports.
What’s also clear is that the suppliers with robust on-the-ground retail and logistics winners will be the winners.
One such player is the ASX-listed Aumake (AUK), which supplies a range of premium goods services to the Asian market – notably China.
Aumake has just forged a timely alliance with the Hunter Valley-based Petersons Wines to promote the region’s wines and other produce to Asian visitors.
The parties have created a joint venture company, Hunter Valley Wine and Tourism Alliance Pty Ltd. The winery will host a marketplace to facilitate bookings (including customised tours) and showcase the region’s charms.
The venture coincides with the strong resumption of inbound Chinese tourism – another sign of the Canberra-Beijing glasnost.
But as Aumake CEO Joshua Zhou notes, there’s also a strong synergy with inbound Chinese trade given the venture will elevate the profile of Petersons’ premium drops – as well as those of the region.
In more concrete terms, Aumake boasts “direct and effective” channels to the capacious Chinese domestic market.
For a start, the company can rely on the firepower of its partner and major shareholder, Hong Kong’s HK Huibeijia Brand Manage Co (HKH).
HKH operates both online and physical stores across China. The latter includes 30 flagship stores, with access to up to 1000 more.
Aumake also continues to sell product – including premium seafood, red meat and health supplements – through its WeChat app.
In March, Aumake reactivated its ‘Kiwi Buy’ trademark. Rather than being a New Zealand centric strategy – it should n be confused with the nation’s Buy Kiwi campaign – the measure involves rebranding four Sydney daigou stores as such.
“The stores have an emphasis on selling established brands and Aumake original equipment manufacturer (OEM) products directly to daigou customers,” the company says.
(Daigous are individuals, usually Chinese expatriates or tourists, who purchase goods overseas on behalf of consumers in China).
Specifically, the stores will focus on selling tier-one baby formula and health products.
Meanwhile, Aumake attributed the December-half revenue uptick to bolstered sales to its partner and major shareholder, HKH.
The company reported revenue of $16.8 million, a 726 per cent improvement on the previous period. Aumake’s net loss also declined 2 per cent, to $1.36 million.
The removal of the wine tariff might be a slow burn revenue wise, but like a decent Hunter Valley drop the benefits will be felt over time.
Ganbei!
This article was developed in collaboration with Aumake Limited. Aumake limited is a sponsored partner on The Executive Edition.
The Executive Edition may hold interest in it’s sponsored company at the time of publication.
