Australia's wine industry is rebounding in China, but oversupply and weaker global demand mean the hard work is far from over.
Background:
Back in 1990, Australian wine was a cottage industry.
Thirty years later, it became one Australia's great agricultural success stories, hitting fourth-largest wine exporter in the world by the mid-2000s. The rocket fuel was all thanks to one country - China.
After the China-Australia Free Trade Agreement slashed tariffs in 2015, exports to China surged from just $14 million in 2000 to $1.24 billion by 2019, overtaking France with close to 40% market share.
Every winemaker jumped on the Shiraz gravy train: hundreds of new vineyards opened to keep up with demand.
But then came COVID.
And then a diplomatic war that changed everything, overnight.
Where we're at today:
In March 2021, China whacked Australian wine with "anti-dumping" tariffs of up to 218%. China claimed this was imposed because Australian wine was being dumped into China at cheaper prices, which hurt local wine producers in China.
But it also came at a time when Australia had called for a COVID-19 origins investigation.
As a result of these tariffs, Australian wine exports to China collapsed more than 95%, and 2,200 exporters shrank to just 117. Meanwhile, Rabobank estimated that Australia was sitting on a surplus of 2.8 billion bottles of wine, the equivalent of 859 Olympic swimming pools.
The good news is that these tariffs were lifted in March 2024... and the rebound was instant: $902 million worth shipped to China in nine months, pushing total exports up 34% to $2.55 billion.
But the problem is that the China that came back isn't the one Australia remembers. Consumption has shrunk dramatically and at the same time, France, Italy and Chile spent three years filling Australia's spot on the shelf.
Where to from here:
The wine industry's future now hinges on two very different scenarios playing out at once.
The optimistic case: Australia's 0% tariff gives it a built-in edge over rivals paying 14%, plus there's genuine growth in Southeast Asia, South Korea, India and Japan.
The pessimistic case: The bottom half of the Australian wine market still has no home. Global wine consumption just hit its lowest level since 1961, and Gen Z is drinking less than ever before.
In fact, De Bortoli, one of Australia's largest family winemakers, just ripped out vines up to 40 years old because production costs now exceed what the wine sells for.
For a decade, the wine industry told itself one story: China is the answer.
We know the premium wines like Penfolds will be fine, but everything below that label is still deciding whether there's a future worth fighting for.
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