Is Australia the new Bordeaux for Chinese investors?

As China’s thirst for Australian continues to grow, deep-pocketed Chinese investors are not just satisfied with tasting Australian wines in their glasses, more are looking to go to the source, purchasing Australian wineries at an “unprecedented level” to an extent that Chinese investors will eventually own up to 10% of vineyards in Barossa Valley.

Andreas Clark, CEO of Wine Australia, at Prowine China in Shanghai today

From private investments to China’s biggest Chinese winery Changyu Pioneers, Australia seems to have become the latest favourite over Bordeaux for overseas investment, with increased domestic demand for Australian wines.

Ranked as China’s second biggest source for imported wines, Australia’s exports to China are at all time high, and earlier this April, its export value surpassed the AU$1 billion mark for the first time, making China the country’s most valuable export market.

With increased demand, comes not only an appetite for the wine but also the land where it is produced.

It’s reported now that up to 10% of vineyards in Barossa Valley, the best-known wine region in Australia, are owned by Chinese investors.

When asked about the purchasing trend, James March, CEO at the Barossa Grape and Wine Association, confirmed the fact with dbHK yesterday at the Wine Australia China Awards in Shanghai ahead of Prowine China opening, calling it the “fastest growth” of purchases among all investors in the region.

The buying spree from Chinese investors is mainly a result of Australian wine’s growing presence in China. Additionally, Australia’s tourism is another draw for Chinese investors. Chinese tourists were the leading group in Australia last year, surpassing New Zealand, with over 1.4 million visitors.

Back to wine investors, Changyu, for instance, purchased Kilikanoon in Clare Valley earlier this year for AU$20.6 million, and another major Chinese winery, Weilong Wine Grape Company, has spent AUS$13.4 million on a number of Australian vineyards, as part of a plan to invest AU$120 million in the country. Smaller wineries such as Chateau Yaldara and Swan Wine Group are also owned by Chinese.

Asked by dbHK at Prowine China about the trend, Andreas Clark, CEO of Wine Australia, believes it is a positive development for the regional wine community to help grow Australian wine brands and increase local employment.

“I am a big believer in linkage. That’s what drives connections and drives long-term commercial success and I think it’s really powerful, and the more linkage we have through tourism and investment, [the better it is]…Obviously every country has its investment rules, Australia has its investment rules and everyone’s gotta play by the playbook,” he said.

Adding that investments are not just coming from China but also France, the US and the UK and Australia itself also invests overseas, he noted however that wineries with Chinese investments in particular have the greatest route-to-market potential.

“The number of Australian brands that have Chinese investment have been enjoying strong growth, off the back of obviously direct connections back in China,” he explained before concluding that “it’s all about growing regional communities, growing the brands and increasing employments. It’s a great story…it brings prosperity.”

Asked if the introduction of zero tariffs next year is expected to boost Australian wine exports significantly, the wine trade association head replied: “The market has already adjusted to the tariff reductions, fundamentally we are placed for long term sustainable growth here…We have strong growth here now. It’s not always going to continue forever. It’s just for sheer mathematics when your base gets high, it’s going to be hard to grow.”