South African wine could be a winner as China slaps Australia with massive import duties
- From this weekend, Australian wines exported to China will double, or even triple, in price due to new import tariffs.
- This could bolster sales of South African wines, which currently represent only 1% of Chinese imports.
- SA exporters have been lagging due to the country's lack of exposure in supermarkets and one ecommerce platforms, one exporter says.
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China has slapped import tariffs of between 107% and 212% on Australian wines from this weekend, as part of a tense – and growing – trade war between the countries.
In recent months, China also banned exports from some Australian beef facilities, launched a crackdown on coal imports from that country, and imposed an 80% tariff on Australian barley.
China says the barley and wine tariffs are anti-dumping measures, but commentators believe it has more to do with Australia’s call for an investigation into China’s handling of the coronavirus pandemic, as well as its decision to exclude Huawei from the development of Australia’s 5G network. Diplomatic tensions between the countries have been growing in recent months.
This could have some profound implications for South African exporters, particularly of wine.
Currently, only one percent of Chinese wine imports are from South Africa, according to Wines of South Africa (WOSA) a not-for-profit industry organisation which promotes wine exports.
This was initially due to French exporters cementing their position in the Chinese market over the past two decades, and also because South African producers have not yet built strong relationships with Chinese wine importers, says Philip Retief, CEO of Van Loveren Vineyards, which exports some of its product to China.
Also, South African wines have a price disadvantage. Australia, New Zealand, and Chile have free-trade agreements in place with China, which meant that in the past, import tariffs of around 17% were waived on their wines.
“So, from the start, South African wines are 17% more expensive and we struggle to compete,” says Retief, who notes the irony, given that South Africa and China are part of the Brics grouping intended to foster closer economic ties.
He believes the new massive import duties on Australian wines offer a great opportunity for South African winemakers. WOSA’s Maryna Strachan agrees, but says that Chile and New Zealand – thanks to their free-trade agreements with China – will probably be the main beneficiaries.
“Still, even if we take 1% of Australia’s market share, we will double our sales,” one wine exporter told Business Insider SA.
Some 52 million people in China drink imported wine, which is almost double the number just seven years ago, according to the industry association Wine Australia. China is the world's fifth biggest importer of wine, and last year Australia overtook France to become the biggest wine exporter to China. Almost 40% of all Australian export wines go to China.
The wine exporter believes South Africa Shiraz exporters in particular have the opportunity to take large market share from Australia producers.
“Our challenge is not to sell too cheap. For me, the opportunities will be driving home our unique selling points of Chenin and Pinotage, picking up Shiraz business and pushing hard on our white wine advantage. No wine producing country can compete with the quality, value and variety that SA can offer,” he said.
Strachan says that WOSA is already fielding more enquiries from importers in China who are looking at developing their South African wines offering in the country.
“There is a growing cohort in the wine community who understands the exceptional quality and value for money available at all price points for South African wine.”
The key beneficiaries will be South Africa wineries who have already invested time, energy and resources in China, says Strachan. “(Local producers) who work with importers who have large portfolios including Australian wines should see immediate benefits as their Australian brands become extremely challenging to sell.”
Retief says a surprisingly big part of South African wine exports are via Chinese nationals who live in South Africa and export to contacts in their home country. South African wine has little exposure in Chinese supermarkets, or via the large ecommerce platforms like Alibaba and JD.com.
He believes local wine exports can grow exponentially if the right channels are developed, and that the new Australian import tariffs may prove a tipping point.
But Strachan warns that there won’t be an immediate pay-off for local wine exporters.
“2020 has been a very tough year for the wine industry in China with total imports down by around 35%. This indicates there is still a significant volume of unsold wine, (which) will likely take several more months and the Chinese New Year sales peak [in February] to level the playing field.
”It is a long game that may only come into fruition in five to ten years,” the wine exporter agreed. “But we are already seeing the transition.”
- Compiled by Helena Wasserman
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