Australia’s Treasury Wine sees long recovery from China tariffs

Australia’s wine exports to China could take years to recover fully after any easing of steep tariffs, the head of Penfolds owner Treasury Wine Estates Ltd. said, as frosty ties between the two countries show signs of thawing.

“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,” Chief Executive Officer Tim Ford said at an Australia-China Relations Institute event in Sydney on Tuesday evening. “This isn’t going to be a big tap that gets turned on overnight for us.”

Australian vintners have sought new buyers for their wine after China imposed heavy tariffs on the country’s wine exports in 2020, decimating what was once its most lucrative market. The US and UK are now their biggest export markets, though sales to both countries declined in the year to the end of March as the global economic slowdown and increased competition hurt demand, according to Wine Australia data.

Ford said Treasury Wine will maintain the export diversification it’s built since China’s curbs, saying the company has worked too hard to build its brands elsewhere “to turn that off overnight.” At the same time, he assured that while the company doesn’t have stockpiles of A$100-plus ($67-plus) wines, it can resume supplying brands worth A$30 to China “pretty quickly” should the status of tariffs improve.

Relations between China and Australia that soured three years ago following a call by then-Prime Minister Scott Morrison for an international investigation into Covid-19 have been steadily improving in the government of Prime Minister Anthony Albanese. The countries’ trade ministers held their first in-person talks since 2019 in Beijing last week, with Australian Trade Minister Don Farrell saying he’s optimistic of having the steep tariffs on wine and barley lifted by the end of the year. Australia’s coal shipments to China have resumed.

Ford was part of the delegation of Australian business leaders who visited Beijing in the past month. While there was no indication of when the tariffs would be lifted, former customers in China were already asking how Treasury Wine might re-enter the market, he said.

“It was really ‘we don’t know when things are going to change, but when they do, what’s your commitment going to be?’ Ford said. “It was quite a remarkable shift in their mentality.”