Opportunities ripen as China re-engages

Chinese tariffs on Australian wine were lifted in late March, bringing three years of uncertainty to an end for many of the state’s producers.

Less than a fortnight later, the Western Australian government announced a $500,000 investment to help rebuild the state’s wine trade with China, implementing a rescue package to go towards marketing, re-engaging with retailers and distributors, hosting trade delegations, and participating in Shanghai and Hong Kong wine exhibitions.

Premier Roger Cook said the reintroduction of WA wines to the Chinese market would spur diversification.

“There is a huge opportunity to re-establish WA wines as a premium product for the Chinese market,” he said.

“There is a significant growth in the domestic wine industry in China, so there’s going to be competition.

“But again, we know that WA wines are highly valued in the Chinese market because of their premium quality.”

Prior to the tariff, 38 per cent of WA’s wine exports went to China, while national wine exports to the country were worth $1.1 billion, according to Rabobank.

Just $10 million worth of product was exported last year as a result of the tariffs, which were as high as 218 per cent in some cases, imposed on Australian wine imports in 2021.

In conversation with Business News, Wines of Western Australia chief executive Larry Jorgensen said expectations for Chinese customers had changed since 2021 and Australian exporters would need to accommodate for these industry shifts when re-entering the market.

“China is our most important export market by volume and by value per litre,” he said.

“What we know is, as the rest of the world has changed, so has China. We don’t fully understand what those changes are, so that’s what we have to find out.

“What is the market like now? What are the demands? What are people looking for? How is distribution going to work? And how is compliance going to work?”

As head of the state’s peak wine body, Mr Jorgensen said there had been changes around the way wine was distributed in China, but re-entry would encourage diversification.

“China was always a bit of a tricky one with compliance, just a different system, basically,” he said.

“Everyone will be far more cognisant of market mix and diversification ... China will be a very valued part of the ongoing market mix.

“But I don’t think anybody will be as dependent on it as they were previously.”

China’s tariffs caused an oversupply of wine in Australia, which restricted wineries from increasing their sale prices despite rising inputs costs.

Julian Langworthy says the recent vintage was the earliest and quickest he had ever experienced. Photo: Tim Campbell

Fogarty Wine Group chief winemaker Julian Langworthy said it would take time to rebuild Australian wine sales to China, but the end of the tariff was positive news.

“We hope it will take some volume out of the domestic market, which is our most important market, and just get the wine stock back to an equilibrium,” Mr Langworthy told Business News.

“The biggest challenge recently has been the real surge in prices of input costs, whether that’s labour, power, fruit prices, vineyard inputs.

“Over the last three years we’ve had a really big increase in input costs: glasses, labels, everything.

“The challenge with that ... is we haven’t been able to get any price rises through the major markets because of the oversupply situation in the industry.”

Mr Langworthy said wineries were under pressure from absorbing the input costs.

“Hopefully we can keep underpinning WA’s position as a super-premium wine region, [in order to] become more profitable and compete on the global scene,” he said.

Calneggia Family Vineyards has been quick out of the blocks, having already reconnected with contacts in China’s wine market.

“We were a bit ambivalent about the tariffs being lifted in terms of our own business because we lost a bit of faith in the Chinese market, given what happened,” principal Mike Calneggia told Business News.

“Happily though, the Chinese importers we were dealing with pre-COVID have all been in contact with us, and in fact we got our first order [on April 11]. So we’re back in the game.

“China’s tariff created quite a bit of turmoil within the domestic market in Australia because all the wine that was going to China needed to find another home.

“It’s quite difficult to do that quickly, so most of that wine found its way back into the Australian market and put pressure on pricing.

“We’re heartened by the lift of the tariff. There’s a little bit more paperwork and red tape to go through, unfortunately. It’s not insurmountable, it’s just another layer of work to do.”

Vintage 2024

Early veraison (ripening of grapes) due to the warm weather and the consequent vintage’s short duration surprised many in the industry.

“The 2024 vintage was the earliest and the most compact vintage I’ve ever done in my twenty-three Australian vintages,” Mr Langworthy said.

According to the winemaker, Fogarty Wine Group’s various wineries would usually still be picking fruit in April.

“This time last year we hadn’t even started cabernet; this year we’ve completely finished,” Mr Langworthy said.

“It was a bizarre season. So dry, very warm and really early.

“The flipside of that is the yields were quite low, which also exacerbates early ripening because if you have less fruit on the vine it ripens in a quicker fashion.

“But the quality has been really quite good, especially in chardonnay and cabernet sauvignon, which are our strongest sweets and most popular wines, at least from a Margaret River point of view.”

Fogarty Wine Group's Deep Woods Estate vineyards. Photo: Tim Campbell

Vasse Felix chief viticulturist Bart Molony and chief winemaker Virginia Willock said the vintage in Margaret River would be remembered for its unprecedented early start and rapid pace.

In its 2024 Vintage Report published in March, the winery confirmed early flowering and ripening of grapes.

“As harvest comes to an end, we are still in shock that it is only the second week of March. It is just so surreal,” the report stated.

“The early start and rapid pace challenged our viticulturists and winemakers, however, a persistent and intense harvest schedule and rigorous attention to detail resulted in wine of astonishing quality.

“The resilience of the vines in the face of such extraordinary conditions is a testament to the region’s viticultural prowess.”

Adaptation and change are necessary to nurture growth, address challenges and improve the WA wine industry moving forward.

Wines of WA is slated to launch a new 10-year plan in May to overlap its current 10-year plan, which will conclude later this year.

“[We’ll have] some new initiatives, focusing on the things that are real and important now,” Mr Jorgensen said.

“Our goals are to increase our value in market share in exports … and in domestic markets, so wine tourism in WA and interstate.

“Also sustainability and, in particular, certification of sustainability. We’re rolling out projects that will help us get producers up to speed on that.

“We’ve got a strong partnership with the state government to grow export markets.”

Larry Jorgensen. Photo: Michael O'Brien

Mr Jorgensen said the changing climate was also a reality that needed to be faced.

“People are mitigating against that through their practices, ranging from what they’re planting … to how they’re managing the vineyard to the styles of wine that they’re looking to make,” he said.

“People are using science and R&D to change that.”

Mr Jorgensen said vineyards were being reworked both in terms of the changing climate and customer expectations.

“We need products that are fit for purpose,” he said.

“There have been some vineyards pulled out entirely because they weren’t fit for purpose in the first place.

“That’s something happening across the country and there’s nothing wrong with that.”

Mr Jorgensen said it was invigorating to see regions evolving as they learned which wines were best suited for their geographical location and the shifting climate.

“A good example is Pemberton, where people had a late ripening red, like shiraz and cabernet, and what they’ve done is graft it over to things like chardonnay, pinot noir, pinot meunier and also prosecco, and starting to focus on sparkling wine,” he said.

“The beauty with sparkling wines, as an example, is that you pick the grapes much earlier because you need lower sugar levels [and] higher acid levels, so you’re mitigating risk against late-season rain, which is quite a problem, particularly in Pemberton, that’s why the karri trees grow so well.

“People are looking at what varieties will be fit for purpose for their region, and for the market.”

Sustainability has become a more pressing issue in recent years, with Wines of WA independent chair Michael Hollingdale saying it was a factor when developing the next generation of winemakers.

“As we move to succession planning, how do we get the next generation interested in taking over what the pioneer families have done in establishing fine wine regions?” Mr Hollingdale said.

“There’s got to be something to attract the next generation, and sustainability is something they’ll be happy to champion.”