Made in China: Treasury Wines’ new Penfolds is from Ningxia

Penfolds maker Treasury Wine Estates is planning to side-step China’s steep wine tariffs by releasing a vintage made within China itself, with the first bottles to be sold just months from now.

The ASX-listed beverages company has been experimenting with wine grapes grown from the central-north region of Ningxia and from Shangri-la, in the western province of Yunnan, which has begun to yield what the company says are “promising characteristics” in quality and flavour.

Treasury Wine Estates announces China as Penfolds’ newest global sourcing region.

Growing grapes in China is part of Treasury’s latest efforts to circumvent China’s crippling wine tariffs and meet continued demand in that market. Treasury has already begun producing wine in Bordeaux, France, Chile and the US.

Chief executive Tim Ford said making locally produced wine in China was a “natural next step”.

“We’re confident we can produce a premium Chinese Penfolds that maintains the distinctive Penfolds house style and uncompromising quality,” Ford said.

Beijing’s exorbitant wine tariffs of up to 200 per cent imposed in November 2020 have forced Treasury Wine to pivot to other markets, particularly the US and Asia. Despite the tariffs, demand for the Penfolds brand remains strong in China and no other premium red wine brand has moved in to fill the gap.

“China has always been an important market for us, and we look forward to continuing to deepen our relationships and affinity with our consumers and the broader Chinese wine community,” he said.

Treasury Wine has also inked a long-term agreement with China’s alcohol industry body, the Alcoholic Drinks Association (CADA), to exchange technical knowledge and expertise.

Treasury’s Shanghai-based managing director of Penfolds, Tom King, said the company’s commitment to Penfolds’ quality remained unchanged.

Tim Ford, Treasury Wines CEO.Credit:Tash Sorensen

“We’ve been building our distribution networks, investing in wine education and culture, and delivering cutting-edge experiences that respond to evolving consumer preferences in the Chinese market,” he said.

At Macquarie’s Australia Conference a few weeks ago, Ford said he spent “zero per cent of my time wishing for the day” China lifted its hefty tariffs, and that Chinese consumers were less focused on country of origin than consumers elsewhere around the world.

Analysts have publicly and privately expressed concerns about the volume of Penfolds entering China through backdoor channels such as resellers who are buying it through Hong Kong or Singapore.

“We think that the reason Australian wine exports outside China have grown so strongly is because wine is being re-exported via the grey market into China,” said financial services firm Barrenjoey analyst Tom Kierath in a recent note.

“We think a key issue investors need to consider is if product is ending up in China (which our industry checks indicate), what happens as demand slows as China endures lockdowns.”

Treasury Wine will launch its French collection of Penfolds this August.

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