Despite the recent good news of China lifting the high tariffs on wine from Australia, Treasury Wine Estates, Australia’s leading wine supplier believes that it will take at least 3 years to rebuild its business in the mainland.
Treasury Wine’s Chief Executive, Tim Ford mentioned that profits for its Penfolds’ wine business in China is expected to grow at only 15% in the 12 months ended June 2024. However, the cost of restarting a once-lucrative trade to China will cut deep into margins.
As such, Penfolds will not return to the profits it had recorded before the imposition of high tariffs by China, but noticeable trend will be growth in premium and luxury wine categories in the mainland.
Prior to the tariffs, China had represented almost 30% of Treasury Wine earnings.
The good news is that this year, Australia witnessed a record grape harvest for higher-quality wines, which could mean its ability to increase the production of top-tier Penfolds labels from 2026, many of which might end in China in the future.
To respond to market demand, Treasury Wine is also working on a potential split of its luxury wines business and the mid-priced premium wines division.
Nevertheless, Treasury Wine is now on a better footing as during the previous few years, it has successfully diversified its wine exports to Thailand, Malaysia and Singapore and it expects to continue to serve these markets. As such, the entry into China will be like an extra boost, ensuring a more stable market for its exports.
