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New importers to benefit from the gap Australia left in Chinese wine market

The Chinese wine market is going through some important transitions. Weak consumption trends, exacerbated by the pandemic, raise questions about overall growth opportunities moving forward.

In addition, the tariffs introduced on Australian wine imports have left a gap in the market, creating opportunities for others to fill.

China has been the hope of the global wine market for most of the last century. Rising incomes and increasing openness to western products fuelled wine consumption growth, which benefited both foreign and domestic producers.

According to the latest wine report by Rabobank, China’s role in the global wine market is now changing.

From a demand perspective, the volume of wine in China in 2020 was dramatically reduced compared to previous years, with wine imports for the first seven months of 2021 down 5.3 per cent compared to the same period last year.

“The import slump can be attributed to several reasons. First, there was an overall slowdown in the pace of wine imports due to the recurring epidemic, disruptions in the global shipping market, severe shortages of containers, delays in shipping schedules, and rising shipping costs,” explained Rabobank global strategist – beverages Stephen Rannekleiv.

“Second, current policies have led to a plunge in Australian imports, and it will take time to fill this share.”

In addition, a large number of Australian wines imported into the country are still in the restocking stage, and the market takes time to digest them.

But while the Chinese wine market has faced considerable challenges in recent years, the fundamentals for ongoing growth in the future remain strong. Younger consumers are still interested in wine, so Rabobank believes consumption should soon return to growth.The competitive landscape of imported bottled wine has changed.

“Although we do expect consumption to increase again, it is clear that the market will not return to the pre-pandemic status quo. The competitive positioning of suppliers in the market – both foreign and domestic – is being completely rearranged,” said Rabobank China Industry Analyst Stacie Wan.

Australian wines, which had gained a dominant position among imported wines in recent years due to the free trade agreement, now face anti-dumping duties ranging from 117 per cent to 218.4%, which directly resulted in an 88.6% drop in imports in the first seven months of 2021.

Following the tariffs imposed on Australian wines, wines from other countries have gained ground to varying degrees.

French wine, as one of the biggest beneficiaries, has seen strong growth, both in value and volume. Chile is also on the rise with competitive advantages and is likely to gain further share to become China’s second-largest supplier of wine by 2025.

Italy and Spain benefited from the drop in Australian imports as well, and are expected to further expand their share in the Chinese market.

“The assumption that France, Chile, and other countries have a long-term opportunity to gain market share in China is based on the current relations between China and Australia,” commented Rannekleiv.

“The longer the anti-dumping duties remain in place, the harder it will be for Australia to reclaim all of its former share.”

The production volume of domestic wine in the first seven months of 2021 saw a slight increase of 0.7% compared to the corresponding period of last year. Leading domestic wine companies experienced strong revenue growth in the first half of 2021.

“Domestic wines are benefiting from Chinese wine consumers’ rising confidence in local products in terms of quality and brand itself,” concluded Wan.

 

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