On Thursday 28 March, China’s Ministry of Commerce (MOFCOM) announced that the anti-dumping duties on Australian wine to mainland China were to be removed from 29 March 2024.
This is positive news for Australian wine exporters, as mainland China remains an important market for the Australian wine sector.
Over many years, Australian wine companies have developed close relationships with importers, buyers and consumers of Australian wine in China and we know that trade and consumer sentiment for Australian wine in China remains positive.
However, the wine market in mainland China is different now to what it was at the end of 2020 when interim duties were first applied on Australian wine. Australian wineries seeking to re-enter the market should consider the changes when building their export strategies.
Regulatory considerations to be aware of
China has implemented a number of regulatory changes in recent years that affect the export of wine to China. Perhaps most significantly, effective 1 January 2022, food manufacturers and exporters must register with the General Administration of Customs China (GACC).
There is a non-exhaustive list of compliance matters to consider before exporting to mainland China here and its recommended that you also refer to Wine Australia’s Export Market Guide (updated on 28 March 2024) for detailed information.
From $1.3 billion to $10 million in wine exports
Prior to the introduction of the import duties on bottled Australian wine to mainland China, it was Australia’s biggest export market with wine exports peaking at 121 million litres valued at $1.3 billion in the 12 months ended October 2020.
Australia was also the number one imported country of origin in mainland China with a 27 per cent volume and 33 per value share of imported wine sales in 2020 according to IWSR.
Since the introduction of the import duties on bottled Australian wine (of 2 litres or less), Australian wine exports to mainland China have fallen dramatically, to just $10 million and 1.4 million litres in the 12 months ended December 2023. The number of Australian exporters to China has also fallen from a peak of 2,400 to 117.
According to IWSR, Australia’s market share of the wine market has fallen to 3 per cent by value and 2 per cent by volume in 2022.
Figure 1: Australian exports to China over time
Source: Wine Australia
The current size of the wine market is now smaller
The mainland China market has changed significantly over the past five years. This is principally due to the decline in the size of China’s imported wine market.
Figure 2 shows wine imports are now a third of what they were five years ago, falling from 688 million litres in 2018 to 248 million litres in 2023. It is also shows that imports were falling prior to the imposition of the duties in 2020 – Australian wine exports were growing against the trend.
Furthermore, data from IWSR shows that between 2017 and 2022, there was also a significant decline in the consumption of Chinese wines in mainland China, with the volume falling by 70 per cent from 855 million litres in 2017 to 252 million litres in 2022.
The decline in imported and Chinese wines post-2020 was exacerbated by the COVID-19 pandemic, associated lock-down periods, a slowing economy and low consumer confidence. The exit of Australia from the wine market has hastened this decline.
Figure 2: Wine imported by mainland China (million litres)
Source: Trade Data Monitor
No other wine producer has taken Australia’s position
No other country has replaced all of the volume of wine that Australia was exporting to mainland China.
The top four importing countries to mainland China currently are France, Chile, Italy and Spain. All recorded significant declines in the value of imports in 2023 – France (down 29 per cent), Chile (down 18 per cent), Italy (down 31 per cent) and Spain (down 48 per cent).
Despite the declining market, there is positivity towards Australian wine in mainland China. Research from Wine Intelligence shows that wine consumers in mainland China still have a very high regard for Australian wine, despite Australian wine being largely absent from the market in the past three years.
For example, in 2022, 88 per cent of imported wine drinkers in mainland China said they would be happy to recommend wines from Australia or proud to serve wines from Australia. Furthermore, wine consumers in mainland China rate the quality of Australian wine very highly, scoring it 8.49 out of 10.
Figure 3: Associations with Australian wine among imported wine drinkers in China in 2022
Source: Wine Intelligence
The strong positive consumer sentiment toward Australian wine in mainland China reflects that the market has traditionally been a premium bottled wine market for Australia, with 85 per cent of Australia’s export value to mainland China priced at $5 FOB or more per litre (translating to approximately above ¥80 RMB retail).
Australia’s position in the market in 2020 was also heavily focused on premium wine sales. According to IWSR, in 2020, Australian wine sales averaged US$19 per bottle, compared with all other imported wine at US$14 per bottle, and Chinese domestic wine at US$5 per bottle. Australia held a 34 per cent share of the premium wine market (¥100 RMB or more per bottle) in mainland China in 2020.
The Australian wine category will be aiming to reclaim this premium position in the market.
Red wine remains popular, but new wine styles are being explored
IWSR data shows that red wine remains the most popular category in mainland China, with 81 per cent of Chinese urban upper-middle class imported wine drinkers drinking red wine compared to 53 per cent for white wine.
However, wine drinkers in China have become more open to exploring other wine styles. IWSR reports that percentage of imported wine drinkers who enjoy trying new and different styles of grape-based wine on a regular basis has grown from 46 per cent in 2019 to 55 per cent in 2023.
The top five white varieties consumed by imported wine drinkers in mainland China are Sauvignon Blanc, Riesling, Moscato, Chardonnay and Chenin Blanc.
Anecdotally, there is also growing interest in no and low alcohol wines as the health and wellness and moderation trends are also evident in China as it is in many other markets around the world.
Unlikely that Australian wine exports will return to pre-tariff levels in the short term
The removal of the duties on Australian wine is a positive development for Australian wine producers and growers. However, expectations that Australian exports will return to pre-tariff levels in the short term need to be tempered against the changing landscape in the China wine market.
The imported wine market is a third the size it was before, meaning the size of the opportunity may not be as big as it was previously.
If Australia was to achieve a 20 per cent share of imported wines, this would equate to around 50 million litres. This will not solve Australia’s current oversupply of red wine, which is estimated to be around 450 million litres of accumulated surplus (Australian wine: Production, Sales and Inventory Report 2022–23).
However, mainland China is still a significant market for Australian wine. Using the average value of Australian exports to China between 2016 and 2020 of A$7 per litre FOB, this would equate to $350 million, which would be similar value to exports to the United States and United Kingdom.
While the market is smaller, there are still opportunities for wineries to consider as they develop export strategies.
Wine Australia is supporting the Australian wine sector to re-enter the market through a coordinated set of activities and advice on market requirements, while continuing our market diversification efforts in other markets. See here for more information.
Australian wine businesses are also encouraged to use Wine Australia’s Ask an Analyst service to book into speak to our Market Insights team for a personalised session to discuss available data and resources to help your wine or grapegrowing business.
