This month must smell like victory for those who pushed for tariffs on Australian wine.
In exchange for essentially being pushed out of the market by those tariffs, Australia’s leading producer, Treasury Wine Estates, is not only making a version of its leading brand Penfolds in China but also aims to eventually sell it globally, which would further buoy the reputation of China as a producer. That initial wine will be released in China in the second half of 2022, according to a TWE press release. Penfolds has also started bringing in wines from its other projects outside of Australia, including from California.
TWE + CADA
On top of this, TWE made a “long-term, multi-faceted strategic co-operation agreement” with the China Alcoholic Drinks Association — the very organization that spearheaded the tariffs that have hit TWE and Australian wine producers as a whole. From the press release:
“The agreement will see TWE and CADA work together to build China’s fast-growing wine industry capability. The partnership will involve technical knowledge and expertise exchange in China wine region development, programs to champion wine education and wine culture, and brand support for the development of world-class quality, integrity, and valuation systems for Chinese grapes and wine.”
That’s a lot of effort to get back what might be just a sliver of a market that it once dominated. (See, “If Penfolds were a country, where would it rank?“) But there is always the potential, I suppose, of huge future gains in a market of 1.3 billion consumers where, after a decade of being one of the world’s leading wine education scenes and seeing its own quality labels amass a mountain of medals, relatively little wine is consumed. The business of selling courses and certificates, trade fairs and wine contests, and seminars and master classes seems to be far easier and possibly more lucrative than actually selling wine.
Anyway, it will be interesting to see how TWE and CADA cooperate, including how projects are funded and who is involved.
As for the wine, it looks like this Panda Penfolds will be based out of Ningxia, where local authorities have been hoping a relatively new and sprawling high-tech operation called Xige Estate will help drive wine sales and, in turn, boost the entire region’s wine industry. Xige has even been called a kind of Penfolds of China, you know, a replacement brand. It’s making a Rawson’s Retreat-to-Grange kind of range of wines, from entry-level right up to rmb6000 a pop; it’s using a numbering system that reminds some of the bin series system; and, most important, its leader Zhang Yanzhi is quite familiar with TWE — he built the the successful importer / distributor Easy Cellar that popularize Penfolds Max across China.
Mainstream news that Penfolds is making this move is not news to the trade and the TWE press release acknowledges as much by saying that is confirming talk about the new wine. In March, for example, the WeChat wine account of WBO reported TWE screened 80-plus local producers and chose ten as final candidates for blending / bottling.
And that it had a focus on Qingtongxia, where Xige Estate aka Pigeon Hill is set. (There were rumblings about Helan Hong, a major government-backed operation up for sale, rumblings that Penfolds was not only going to bottle there but also possibly buy it.)
The talk about Penfolds goes even further back, pretty much to just after the tariffs were announced. It’s not easy to keep such things under wraps given how many people are involved. For example, a member o a TWE wine-making group contacted me last October and said their upcoming itinerary that covered Yunnan and Ningxia, with the latter visits to include meetings with the regional authorities. That’s a lot of people getting wind of the plans.
Anyway, TWE certainly isn’t the first major international brand to make wine in China — current options include Ao Yun (Yunnan) and Domaine Chandon (Ningxia) by LVMH, Longdai (Shandong) by DBR Lafite and Helan Mountain (Ningxia) by Pernod Ricard — but this is unfolding far faster than those carefully planned ventures.
Finally, this saga reminds me of this site’s April Fool’s joke in 2008 about Great Wall buying Penfolds, with plans for a label that featured a panda and koala hugging. That label might work well now.
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