China-Australia relations: wine traders eye spirits to ‘survive’ crippling disruptions

22-Apr-2021 Intellasia | South China Morning Post | 7:03 AM Print This Post

Relations between China and Australia have become fraught over the past year after Canberra pushed for an international probe into the origin of the coronavirus without diplomatic consultations beforehand, and Beijing has responded with a number of trade blocks on wine, barley, cotton, copper, coal, sugar and lobsters. We look at the issues in this series.

For years, manning a booth at a beverages trade fair hosted by either the federal or local governments of Australia meant one thing to South Australian wine exporter Michele Zhuang: selling wine.

Earlier this month, however, her staff in China attended a South Australian government-hosted fair in Chengdu, Sichuan province, not just to promote wine, but also to test the Chinese appetite for Australian spirits such as whisky and gin.

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For Zhuang, this new venture to tap into the spirits-export market forms part of her plan to diversify away from the once-lucrative Australian wine export industry that has been crippled by newly imposed Chinese anti-dumping duties of up to 218.4 per cent.

But her pivot is also an example of the resilience being displayed among many traders in China and Australia who have become inadvertently caught up in the year-long political conflict between the governments of the two countries. They are doing what they must to survive the trade disruptions, she said.

A year ago this week, Canberra pushed for an international inquiry into the origin of the coronavirus without diplomatic consultations with Beijing. Since then, Beijing has imposed several trade restrictions on Australian exports such as coal, barley, wine, beef and lobsters.

“What we are doing is to keep maintaining trusting relationships with our clients [in China],” she said. “Replacing Australian wine with spirits will only make up 5 per cent of lost wine exports.

“But we need to adjust to survive such a challenging environment by looking at selling non-Australian wines and Australian whisky … We are very disappointed.”

Zhuang said the alcoholic beverage export business to China is still viable, but political risks must be managed.

“All we can do now is to trust our business judgment and do the things we can control,” she added. “The key is to respond quickly to the changes.”

Since China’s Ministry of Commerce announced the final anti-dumping duties in late March — after temporary levies were collected since November — Zhuang lost no time in assembling a new export blueprint to sell spirits to China’s Generation Z consumers, its middle class and its business elite, many of whom are existing clients still keen on Australian alcohol.

Generation Z consumers are a particularly key target, given a generational shift that sees them becoming more interested in collectible toys and whisky than in rare teas and calligraphy.

Zhuang has started working with South Australian spirits producers such as Ambra Spirits, Red Hen Gin and Betheone Whisky — all showcased at the Chengdu fair earlier this month — while securing new wine export opportunities in the Japanese, EU and US markets and selling non-Australian wines in China from places such as Uruguay and North Macedonia.

But it is hard work, Zhuang says, as she has to “start again” and educate her clients about the virtues of Australian spirits the way she did with Australian wine years ago.

The spirits industry in China is a different beast, dominated by the local traditional baijiu and giant foreign exporters such as Diageo and Pernod Ricard. It accounts for only 2 per cent of the total alcohol market in China, with spirits such as brandy and whisky popular after baijiu, according to the China Chamber of Commerce for Import and Export of Foodstuffs, Native Produce and Animal By-Products.

Australia’s spirits exports to China in 2019 accounted for 0.9 per cent of all Chinese spirits imports.

“It’s early days in an industry dominated by big players,” Zhuang said.

The South Australia government threw its support behind exports of spirits by agreeing to invest up to A$50,000 (US$38,800) to develop the industry earlier this year. But as the industry’s exports are still in the infancy stage, the government and the local industry body South Australian Spirit Producers Association (SASPA) do not yet have comprehensive export figures.

SASPA said it was aware that some winemakers have also started producing spirits, but none of them had been exported.

Ambra Spirits, with whom Zhuang is working, also says they are still in the explorative phase.

Other winemakers such as Canberra’s Shaw Wines have diversified into Southeast Asia by securing new export deals in Singapore, Thailand, Malaysia and Vietnam.

Shaw Wines’ range of Rieslings, Merlots and Malbecs have been earmarked for high-end hotels and wine shops in those countries.

The company, which had been exporting to China, stepped up its marketing efforts by using new tactics such as sales channels on the ubiquitous Chinese social media app WeChat.

Volumes sold to other markets are small, but Shaw Wines director Graeme Shaw is looking to increase sales by flying in international visitors to his winery for gourmet experiences, when international travel resumes.

Shaw doubts that the trade relationship between China and Australia will ever be fully repaired.

Two-way trade between the two countries reached a high of A$240 billion (US$186 billion) before trade disruptions hit. Although their overall trade numbers remained high for all of last year, they were mainly propped up by the high value of the iron ore trade.

When asked what he would like to say to both governments, Shaw said: “Honour the [agreed-upon] trade agreements and respect due process without taking action prematurely”.

https://sg.news.yahoo.com/china-australia-relations-wine-traders-122927739.html

 

Category: China

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