October 6, 2020 — It’s like a little United Nations. Australian wine company, Treasury Wine Estates (TWE) owns the historic and highly respected Beaulieu Vineyard (BV) in California’s Napa Valley. The BV label will soon appear on a wine made in Bordeaux, France for the Chinese market. OK, we’re clear on that.
What we’re not clear on is why TWE is doing this but we do have a few clues.
China, announced in August that it is investigating the Australian wine industry for violations of anti-dumping regulations as it has affected the market for Chinese wines in China. The Chinese want to impose a tariff of 202.70 % on Australian wine effectively causing prices to triple.
China is Australia’s biggest export market for consumer products such beef, barley and wine. Beef and barley have already been targeted by China, a move that is seen as retaliation for Australia’s call for an international investigation of the origins of Covid19. In April, Australian Foreign Minister Marise Payne supported an investigation during a television interview. A month later, China announced an 80% tariff on barley amid on-going accusation and investigations of Australian dumping. At the same time they suspended beef purchases citing “violations of ‘inspection and quarantine requirements’ discovered by customs officials” according to the South China Morning Post. However, there is one school of thought that China’s move against Australia’s beef and barley is a strategy to allow them to fulfill their obligations to buy $12.5 billion of US farm products in 2020.
Perhaps it is both plus Australia’s reaction to events in Hong Kong, which added to their crankiness. Reaction to the Australian government’s call for an international investigation into their handling of the virus was swift and angry with China’s state media posing “Why would the Chinese people want to eat Australian beef, drink Australian wine, travel to Australia for vacation or study?”
For Treasury Wine Estates, Australia’s largest wine company with many prestigious brands, including the iconic Penfold’s, it is a good strategy to use one of their most prestigious brands in the United States as the label for Bordeaux wine made in France by a team experienced in making wine for the Chinese market. At least it will avoid the 202.70% tariff. There is also a meaningful and historic link since BV is famous for its superb Cabernet Sauvignon and its founder, Georges de Latour came from Bordeaux to the Napa Valley where he founded Beaulieu Vineyard 120 years ago.