Treasury Wine Estates says door to China “will remain closed”
Despite signs of thawing relations between Australia and China, Treasury Wine Estates is not banking on the removal of sky-high tariffs any time soon, says CEO Tim Ford.
During a company earnings announcement this week, the Treasury Wine Estates boss squashed any notion of the crippling tariffs finally being lifted on Australian exports to China.
“Clearly, there’s no change at the moment and that’s very important to note,” CEO Tom Ford said on Wednesday.
The Australian wine group, whose brands span the full arc of the wine world, from luxury offerings such as Penfolds, Wynns and Stag’s Leap to more widely accessible brands such as Blossom Hill and 19 Crimes, has felt the impact of the 200% tariffs across the board.
The hit taken by TWE’s sales was evident from the company’s just announced first-half earnings, which missed analysts’ estimates, and saw Treasury’s shares falling by 6.8%, the most significant drop for more than two years.
However, Ford said he is on target to meet his five year targets by the end of 2025 following a complete rethink of the business.
In place since late 2020, the eyewatering tariffs which pulled the rug out from under businesses like Treasury, are widely considered to be a retaliation from China against Australia questioning the origins and handling of Covid-19.
The Australian government currently has two complaints lodged with the World Trade Organisation against China’s tariffs on Australian wine and barley.
There have been positive murmurs over the last few months of improving relations between the two countries, with trade ministers from Australia and China holding virtual meetings to discuss how to move forward. However, Ford’s comments strike a more cautious note.
“There are positive tones so we’ve also started to think through what could occur and what would occur, and what we would do should it change,” he said. But Ford made it clear there was nothing to suggest that change was imminent. TWE is “working under the assumption that China will remain closed,” he said.
Treasury has taken a number of innovative steps to mitigate the effects of the punitive tariffs, including launching a ‘made-in-China’ Penfolds last year, with grapes grown on Chinese soil. The company said it had uncovered “promising characteristics,” in grapes from Ningxia in the central-North of China, and from Shangri-la in south Western Yunnan.
TWE also said that a “multi-country of origin” strategy was helping it to return to growth in mainland China. This includes Penfolds’ inaugural release of a French collection targeted almost exclusively at the Chinese market.
The company will continue to expand Penfolds’ Chinese wine portfolio and grow the business elsewhere in Asia, Ford said.