‘Great potential’ for Australian bulk wine in China

Bulk wine producer Winegrapes Australia is stepping up its focus on Asia, where its winemaker believes there is “more enthusiasm” for Australian wine and opportunities to achieve greater success in the short term.

Winegrapes Australia winemaker Peter Flewellyn

Speaking to the drinks business at the World Bulk Wine Exhibition in Amsterdam this week, winemaker Peter Flewellyn highlighted China as a market that was showing a lot of potential for Australian winemakers.

“It’s one if those markets where if you put the effort in and you get a return”, said Flewellyn. “We need to get out and find more markets, but for short term results China is the market. It’s a bit more of a long term strategy here in Europe. There’s more enthusiasm from Asia.”

Recently the Australian producer has begun shipping tasting packs to China in an effort to turn more consumers onto Australian wine, comprising of Cabernet Sauvignon and Shiraz from different regions.

“People have realised that interest is there and that it’s about sitting down and allowing people to compare different varieties and regions”, explained Flewellyn.

China has undergone huge changes in recent years following the introduction of austerity measures by Chinese President Xi Jinping to cut some $9 billion in public spending and crack down on gift giving and corruption among government officials. Three years on, China is now starting to behave like any other major wine market, according to Richard Halstead, CEO at Wine Intelligence, functioning without the distorting influence of state-funded banqueting or the “gifting” of fine wine.

Halstead’s views are echoed by Judy Chan, president of Grace Vineyard in China, who said earlier this month that China’s austerity drive had allowed for the “birth of the real consumer”. Flewellyn too believes that the Chinese wine trade is “far better for consumers the way it is now”.

“The profit margins have disappeared in the middle and it has brought it back to a more normal market”, he noted. “Now is the time to get back in there and work hard to see the results. We have a free trade agreement coming but it looks like it’s moving in the right direction.”

The Chinese-Australia Free Trade Agreement was signed in June of this year, making 85% of Australian goods shipped to China tariff-free. That will increase to 95% once the agreement is fully implemented over the course of the next four years.

In the 12-months to June 2015, Australian wine exports to Asia jumped by 26% in value to a record AUD$600 million, according to figures released by Wine Australia. China is currently Australia’s third biggest export market, increasing in value by 32.1% in the same period to $280m, following the US, which was down 7.9 per cent to A$415 million, and the UK, down 1.5% to $369m.

Hong Kong is the country’s fifth biggest market, increasing in value by 28.4% in the 12 months to June 2015 to $112m.

“There are certainly challenges, but that’s for the Chinese to fix”, said Flewellyn. “There is fantastic potential there and Australia is making it easier for them to invest, so they want to tap into that. We are in a really good position.”

Winegrapes Australia was established in 1992 and counts 100 grape growers among its members whose vines cover 3,000 hectares across South Australia, including the Barossa Valley, McLaren Vale, Coonawarra and Clare Valley.