Austerity hits Penfolds price in China

The austerity measures put in place by the Chinese government have led to huge price cuts in Treasury Wine Estates’ flagship label, according to the Australian Financial Review.

The Australian wine industry has rapidly expanded into the Chinese market for high profits over the last five years. The AFR claims that the heavily discounted price of Penfolds in China could loom as a serious threat to Treasury Wine Estates’ growth projections in China, the winemaker’s most promising market.

Penfolds’ Rawson’s Retreat wine has been priced at 228 yuan on one of the most popular Chinese online shopping sites “the 1st shop”. However, this week the price has fallen to 59 yuan a bottle.

Another online wine shopping site yhd.com has also reportedly cut the price of three Penfolds wines by over 50%, leaving some of its product scarcely selling at higher levels than those in Australia.

According to one wine retailer in China, a number of imported wine have been discounted, and this situation could continue for another 12 months.

In fact, Treasury Wine Estate’s interim chief executive Warwick Every-Burns told The Australian newspaper, that consumer pull through in China is, “softening as a result of the recent leadership change and well documented government austerity measures.”

However, the company is still optimistic about the Chinese market. A spokesman of Treasury Wine Estates told the AFR that the discounting was in the hands of the retailer, adding that the Penfolds brand “remains strong in China”.