Australian winemakers turn their attention from China to India amid a new trade deal

Australian winemakers welcome the Albanese government’s new trade pact with India but say it will be no substitute for the once lucrative export market to China, which was worth $1.1 billion before plummeting 92% in value amid Canberra and Beijing’s diplomatic freeze.

See Saw Wine CEO Justin Jarrett tells SmartCompany that any free trade agreement leads to better outcomes for the agricultural sector, but cautioned that the Australia-India Economic Cooperation and Trade Agreement (AI-ECTA) was no silver bullet for Australian winemakers still reeling from the China fallout.

“The opportunity to have tariff-free wine trade into the largest population on the planet will of course benefit the wine industry, but it must be taken with the context that ‘although a large population a large percentage [in India] do not consume alcohol’,” the NSW winemaker pointed out.

Jarrett continues that See Saw Wine wasn’t exporting to China before the 2021 trade ban (which affected sectors like wine, barley, coal, seafood, timber and red meat), but, like the rest of the domestic wine industry, the small business felt the effects of it acutely.

“The ban resulted in an excess of wine across the country and has placed downward pressure on prices for all Australian wine producers,” he explained.

“The opportunity to grow the Australian wine presence in India can relieve some of this negative price impact, especially in the red wine sector.”

NSW’S Printhie Wines was among the wineries exporting to China before the fallout, and the family-owned cellar door even had a Printhie Wines shop in bustling Guangzhou, China.

“The China export tariff certainly had an impact on our business and we no longer export there,” Emily Swift, whose family owns Prithie, told SmartCompany.

“However, the wine industry has reacted quickly and diversified its export markets to create a buffer against any future instances like this. Businesses are now avoiding relying on a singular export market.”

Why did China block Australian exports?

Our $1.2 billion wine export industry was slashed to a $200 million fraction of its former glory after the former Coalition government’s hardline stance with Beijing, beginning with Australia blocking Chinese telco Huawei from accessing our 5G network on national security grounds.

Relations iced over completely when Morrison publically and repeatedly called for an independent investigation into the origin of COVID-19 at the start of the pandemic, which infuriated Beijing and prompted a slew of warnings about the Australian government damaging its bilateral relationship “beyond repair”.

“The Morrison government’s adventurism to fiddle with this mutually beneficial comprehensive strategic partnership is in defiance of rational thought and common sense,” read an editorial in the Global Times in April 2020.

“Canberra is treading on a hazardous path that has no prospect for a U-turn during the COVID-19 pandemic, and likely for a long time afterward.”

At the time, Morrison waved that away, saying Australia’s relationship with China was “mutually beneficial” and, of its lucrative trade industry, added, “I see no reason why that would alter in the future”.

But it did. In March 2021 amid allegations of wine dumping, Beijing announced strict tariffs of between 116–218% on all bottled Australian wine imports until 2026, largely seen as a broader retaliatory measure from China’s government that shut the door on Australia’s largest export market.

However, newly-minted Foreign Affairs Minister Penny Wong has been praised in recent months for thawing our relationship with Beijing on a tour of several countries in the Asia-Pacific, potentially signalling a new dawn for our export industry.

India’s emerging market has big potential

In the 12 months to the end of September 2022, Australia exported 3.6 million litres of wine valued at $16.2 million to India, up a whopping 41.5% in volume and 48% in value compared to the year ended September 2021.

And the trajectory is expected to continue. Wine consumption in India is forecasted to soar from 29.2 million litres in 2020 to 55.5 million litres in 2025, according to Euromonitor’s Export Market Development Guidebook for India, the result of a rising middle class, increased urbanisation, consumer interest in imported wine, and a shift away from spirits.

The market in India is mostly for middle-of-the-range wine, rather than premium choices, though consumer palates in India are changing fast.

About 85% of imported wine is sold in the ‘standard segment’, costing about INR1000–1999 per bottle ($35.45) at the moment, with the remaining 15% falling in the premium category. IWSR predicts the demand for premium options will see that category grow to 18% by 2025.

A spokesperson from Australia’s leading wine industry body, Wine Australia, tells SmartCompany it is cautiously optimistic about the trade deal (which comes into effect later this month) though with a caveat.

“It’s important to note that, unlike China, India is a new emerging market, where wine consumption currently is small — even when compared to other alcoholic beverages,” a spokesperson said.

“However, the wine culture in India is growing as consumers discover and learn more about wine and it’s exciting that Australian wines are part of this discovery.”