China’s hefty import duties have inflicted deep scars on the local wine industry and triggered an oversupply that could fill 859 Olympic pools.
Industry insiders fear the damage has been too deep. Since the tariffs, the wine sector has been grappling with an oversupply of red wine, particularly in commercial wine and in ‘heavy red’ varieties like shiraz, cabernet sauvignon and merlot. In June 2022, national wine inventory levels came at nearly 2.
The red wine glut isn’t just affecting small-time players: those at the top end of town are watching these trends closely and adjusting their business model accordingly. Luxury and premium winemakers are still seeing customers happy to pay for a top drop; for instance, Treasury Wine Estates was able to successfully pass on price increases to its flagship Penfolds brand, but will close one of its wineries used to make budget brands as customers snub plonk in favour of higher-quality wine.
Winemakers have also sought to fill the gaping China-sized hole by drumming up demand in other Asian markets like Hong Kong and Thailand. The UK and the US are Australia’s top two export markets, representing about 39 per cent of total wine exports in value and 57 per cent in volume, but demand from both went backwards in the 2023 financial year. At its peak, the Chinese market was worth more than the US and UK market combined.
“It is critical grape growers start engaging with their winery contacts now and seeking advice as early as possible.”
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