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But with significant pressure to reduce operating costs and growing consumer demands for value for money, it’s important to keep a keen eye on the right export markets as well as tariffs and duties as part of your global expansion strategy.
Before 2021, China was Australia’s largest wine export market, accounting for over $1b annually. Yet when China imposed anti-dumping tariffs and countervailing duties between 116.2 per cent and 218.4 per cent in March 2021, the impact on the Australian wine industry was significant. The anti-dumping tariffs were a response to claims Australian wine was being dumped into China at cheaper prices, injuring local wine producers in China, while the countervailing duties were based on the premise that the Australian government was granting subsidies to Australian winemakers.
Exports to China plummeted to just $10m by 2023. This shift forced Chinese consumers to consider other markets like Europe and South America, leading to an oversupply of Australian wine and a drop in prices.
However, China formally lifted these tariffs in March 2024, offering new hope for the struggling industry.
While this creates an opportunity for many winemakers, it also highlights the volatility of international trade and the importance of market diversification.
As a result of the trade restrictions with China and the uncertainty around diplomatic relations, Australian wine producers are diversifying into other emerging markets. North America and the United Kingdom remain strong destinations, while growth is seen in Hong Kong, Singapore, Thailand, Malaysia, South Korea and India’s expanding middle class.
However, these markets are unlikely to fully replace the volume previously exported to China.
With many businesses reflecting on their performance last financial year, this creates an opportunity to assess whether it is strategically sound to export (or increase export) into the Chinese market to take advantage of now-lower duties.
While navigating the recent reduced demand from China and evolving local consumer preferences, many businesses may need to consider restructuring their business to ensure their business model remains sustainable.
In some instances, this may include implementing a formal restructuring plan to address financial and operational impediments through either a Small Business Restructure or Voluntary Administration process.
Alternatively, Australian wine producers can consider diversifying their product lines.
To appeal to the diverse audiences in export markets, winemakers should consider market trends in different jurisdictions to appeal to their target market. This includes a generation of drinkers more conscious of their health, wellness and the environment.
It is increasingly important to focus on local market nuances, whether appreciation of the ‘Australian Made’ label, value for money, more health-conscious choices including low alcohol wine, accessible packaging options such as smaller bottles or canned wine, or demand for sustainable winemaking, organic and vegan wine.
Producers need to innovate and implement new technologies to manage rising costs and improve yield.
A technological and data-centric approach will help winemakers improve vineyard management, reduce inefficiencies, and improve wine quality. Examples include using drones, satellite imagery, soil sensors, robots for repetitive tasks, and alternative ageing techniques.
Despite industry challenges, reduced tariffs to export wine to China represent an opportunity for diversification, refining operations and investing in tools to future-proof your strategy for many winemakers.
Our team specialises in helping you optimise your tax and exports through global tariff expertise, offering due diligence on supply chains and transactions to manage transfer pricing effectively and make informed decisions.
Don't hesitate to contact us to learn how our restructuring, customs and trade experts can enhance your strategy.
