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TWE readying to divert Penfolds shipments to China ‘within weeks’

19 February 2024 By Sarah Neish

With China expected to lift its crippling tariffs on Australian wine by the end of March, the CEO of Treasury Wine Estates is standing by to re-allocate Penfolds shipments away from other global markets.

Tim Ford, CEO of Australia’s biggest wine company, Treasury Wine Estates (TWE), said last week that he is ready and waiting to send out the first shipment of Australian wine to China following the three-year battle over tariffs.

“We expect a decision and therefore a path forward by the end of March,” Ford told analysts while announcing TWE’s first-half results for 2024.

“We are both well prepared and well placed to re-establish our Australian country of origin portfolio in China.”

Throughout the conflict, which has had a devastating impact on the Australian wine industry, TWE has continued shipping its non-Australian wine to China, including wines produced in California and New Zealand.

However, Ford revealed that as soon as he receives word that the tariffs have been lifted he will re-allocate some Penfolds Bin and Icon wines from other global markets towards China.

Ford added that the China market, once re-opened, presents a “significant growth opportunity” for Treasury’s luxury Penfolds brand in particular, and he expects China to play a key part in TWE realising “mid- to high-single-digit organic earnings before interest and taxes (EBITS) growth in 2024.”

Treasury’s EBITS for the first-half period ending 31 December were AU$289.8 million ($188.25 million).

Negociants will need to be quick off the mark as Penfolds’ Luxury and Icon wines were released on French platform La Place de Bordeaux this January to unlock “significant further potential”.

Earlier this month, db reported that Australian wine producers have been increasingly exporting to Hong Kong, in the absence of a Mainland China market. Hong Kong, being a special administrative region of the People’s Republic of China, is not tied to the same exacting rules as the mainland and has a degree of political autonomy.

Value exports of Australian wine to Hong Kong rose 74% YOY in 2023, with 9.4 million litres of Australian wine valued at AU$290 million (£149m) sent to Hong Kong in the 12-month period.

China’s sky-high tariffs have left Australia with a surplus of 2.8 billion wine bottles, which, according to Rabobank, will take two years to clear even after the tariffs are lifted.

As a result, many Australian producers were forced to dump their 2022 harvests, despite the exceptional quality of the vintage, with one grape grower letting 130 tonnes of Shiraz drop to the ground because he said “it was not worth anything”.

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