Boom, bust, boom: Treasury Wine’s China story

(Reuters) – Treasury Wine Estates (OTC:), Australia’s leading winemaker, issued its first annual results since China removed punitive levies on Australian wine imports and forecast a strong fiscal 2025 as it re-establishes itself in its former biggest market.

Here is a timeline of events over the past few years that led to the imposition and subsequent lifting of heavy tariffs on imports of Australian wine into China:

WINE FLOWS, PROFITS SOAR

December 2015: The China-Australia Free Trade Agreement (ChAFTA) is implemented to facilitate trade and investment, providing increased market access for Australian beef and wine.

2015-2019: Treasury Wine’s net income triples over the next four years.

January 2019: Chinese import duties on Australian wine fall to zero, giving Australia a 14% tariff advantage over rivals.

August 2019: Treasury Wine posts a record annual profit of A$433.80 million ($287.18 million) for fiscal 2019.

POLITICAL TENSIONS FLARE

April 2020: Australia seeks support for an international inquiry into the origins of the COVID-19 pandemic, prompting a strong rebuke from China.

August 2020: China’s Ministry of Commerce (MOFCOM) initiates an investigation into Australian wine imports.

November 2020: China imposes anti-dumping tariffs on Australian wine ranging up to 212.1%, making Australian wine significantly more expensive for Chinese consumers. Treasury Wine says it will divert hundreds of thousands of cases of wine to other countries to avoid the hefty tariffs.

March 2021: China finalises its investigation of Australian wine imports and raises the tariffs to as high as 218.4% for the next five years.

August 2021: Treasury Wine’s fiscal 2021 result recovers on strong performance in non-China markets but remains substantially below the 2019 record.

January 2023: Australia files a written submission to the World Trade Organization (WTO) Dispute Settlement Body challenging the tariffs.

THAWING OF RELATIONS

October 2023: China agrees to conduct an expedited review of its duties on wine. Australia agrees to suspend its challenge with the WTO for five months. Treasury Wine shares jump 5%.

March 2024: China’s foreign minister Wang Yi visits Australia and New Zealand. China’s commerce ministry announces anti-dumping and anti-subsidy tariffs on Australian wine will be lifted from end-March. Treasury Wine announces the resumption of the distribution of some of its products in China.

May 2024: Treasury Wine CEO says the wine producer will build its workforce and marketing budget in China as it navigates re-entry in what was once its largest market.

August 2024: Treasury Wine says it is re-establishing its Penfolds portfolio in China and is seeing strong demand.

($1 = 1.5106 Australian dollars)