Criminal celebrities help Australia’s biggest wine producer fill the Chinese vacuum

Australia’s biggest wine producer has moved to offset the crushing impact of Chinese tariffs on the country’s wine industry by hiring famous criminals to carve out a stronger position in the US luxury market.

Treasury Wine Estates, best known for its Penfolds and Wolf Blass brands, attributed the surge in U.S. sales to the success of its more expensive brands, including 19 Crimes, a collaboration with rapper Snoop Dogg and former stockbroker turned media mogul Martha Stewart.

19 Crimes sells wine with Australian convict stories and has adapted the concept to the United States by collaborating with convicted celebrities. “Martha’s Chard” launched under the 19 Crimes brand in January following two launches of Snoop Dogg, a Syrah-Zinfandel blend and a rosé, since 2020.

Tim Ford, chief executive of TWE, said the U.S. luxury wine market is now an integral part of the winemaker’s A$9 billion (US$6.5 billion) growth strategy after the collapse of its sales in China following the introduction of high tariffs. on Australian wine.

“The United States is the largest growing luxury wine market in the world. It’s a great market,” Ford said in an interview with the Financial Times. He said the company was “on track” to reallocate luxury wine originally intended for China to other markets, a process estimated to take three years.

Sales outside China in Hong Kong, Singapore, Taiwan, Malaysia and Thailand were up 119%, Ford said.

Branded alcohol is a rapidly growing segment in the beverage market. Successful launches include actor Dan Aykroyd’s Crystal Head vodka and heavy metal band Iron Maiden’s Trooper range of beers. Premium tequila brand Casamigos, co-founded by actor George Clooney, was sold to Diageo for $700 million in 2017.

The pivot to the United States followed the imposition of a 175.6% tariff on Australian wine by Chinese authorities in November 2020. Ford said China had been its “most important market and most lucrative” with luxury brand Penfolds popular with well-heeled consumers in the countryside.

Sales in China slumped to just A$2 million from A$78 million in the second half of 2021, driving TWE’s net profit down 7.5% to A$109 million in the period. Trade body Wine Australia said this month that Australian wine exports to China last year fell 93% to A$29 million.

This collapse in demand combined with a bumper harvest has led to a glut of red grapes in Australia’s wine regions as farmers face the prospect of lower prices or wasted stocks in 2022. “It will be a tough vintage for producers, no doubt,” Ford said.

Still, Ford was adamant that Penfolds had a future in China – a market where counterfeit versions of its wine appear under brands such as “Benfolds” – despite the imposition of tariffs. TWE has left 100 employees, including the head of the Penfolds unit, in Shanghai and is working to export French and American variants of the wine to the country.

“We are not moving away from China,” he said, adding that the company was in the midst of a “transition period” where it is finding new ways to supply Chinese consumers.

The tension with China has forced Australian winemakers to improve sales in other markets, including the UK and the US.

Ford said the US market, which TWE entered in 1990 as part of the Foster empire, was “a problem”. At the time, she owned brands that sold under $10 with low profit levels.

He has since sold them and last year paid A$434 million to acquire Frank Family Vineyards in Napa Valley as he seeks to set up a ‘sister’ company Penfolds in California.

As Australia lifts its strict Covid-19 restrictions, Ford is expected to travel to the United States in the coming weeks, his first overseas trip since being appointed chief executive in July 2020. He joked “I still managed to get to Adelaide.”

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