RISING STAR.
Following the launch of Halliday Wine Companion into China earlier this year, James Halliday contemplates the role, growth and impact of this populous nation.
I HAVE VISITED China on many occasions over the past decade, and, little by little, have built up a mosaic of impressions. I would like to say knowledge and/or understanding, but that is a step too far. One piece of the mosaic is that road traffic self-determines what laws will be followed, and those which won’t.
Lane changing is the sacred cow; you start with the proposition that sudden changes (and chop-off manoeuvres) without the use of signals are inevitable, as is running red lights. The car that makes the first move gains right of way, the only protest by the other vehicle a beep of the horn or a squeal of tyres. It’s akin to a shoal of fish or flock of birds reacting en masse to quick changes of direction.
The result is that even in Beijing, and all other cities (there are
100 cities with a population in excess of one million), traffic is alternately slow or hair-raising, but not nearly as stressful as you might imagine; accidents rare, police cars even more so.
Another set of rules governs dining at restaurants with a group of friends or business acquaintances. Each person will have two glasses, one dedicated to red wine replenished from a small jug of the wine. Throughout the evening one guest will leap to their feet without warning, and with glass in hand accost a fellow diner by standing next to them (and possibly another nearby guest), leading to each emptying the glass in one draught with no pretense of smelling or deliberately tasting the wine (not so long ago the quality of the glasses was so poor it didn’t matter, but Riedel et al are becoming increasingly apparent).
My Wine Companion is being translated into Mandarin (with an interlocking website), so Hardie Grant, my joint venture partner, and I have a vested interest in understanding the development of the market. This interest is not simply a matter of the skyrocketing amount of Australian wine being imported, but the way it’s being consumed.
A shorthand burst on the increase in value of wine trade between Australia and China starts in 2000, when mainland China imported $1.2 million of Australian bottled wine (throughout this piece I use Australian dollars, mainland China and bottled wine prices). By 2010, imports were $64 million, 2015 $370 million, March ’17 $568 million, and March ’18 $848 million. And if you added Hong Kong and Macau, the figure was nudging $1 billion, with China importing more wine (by value) than the US and UK combined, these being our second- and third-largest markets. Moreover, Australian wine had the highest value per litre of any wine, pushing France into second place on this score.
Looking at the outcomes, the average is that already every Chinese person (irrespective of age and sex) drinks more than a bottle of wine a year. Let’s put a few more facts on the table. In 2016, total sales of alcohol in China were in the region of $230 billion; spirits and Chinese rice wine accounted for $140 billion, beer $57 billion, wine at $23 billion, and finally a mysterious yellow wine category at $6 billion.
In 2016, Australia accounted for less than $1 billion of that figure, with a yawning gap to play with. Generational change, and everincreasing visitation of Australia by long-term students, tourists (in the usual meaning of that term) and everything in between, will all add exponentially to the demand for wine. Needless to say, it won’t all be Australian and it won’t all be Treasury Wine Estates brands headed by Penfolds, but they will be at the head of the queue.
Taking $1 billion from any one or more of those sectors looks easy, the most obvious path taking shares from the beer and rice wine sectors. A translated Wine Companion is more than just exciting with this background.
All of which might seem to leave Australia in a good place, perhaps too good to be true. Only Alice in Wonderland could accept Trump tweets as a substitute for good government, or indeed any form of guide for future strategies of the world’s greatest nation.
It may (just) be possible that early morning bodily emissions are translated into the ever-shifting messages and largely contrary tweets of a diabolic AI designed to keep the rest of the world on the wrong foot, his seeming desire to engulf the world in a global trade war, and China’s power play in the South China Sea. China has a Free Trade Agreement with Australia that has led to the progressive reduction in tariffs on wine, the final step due early next year. It’s hard to believe this won’t happen, but the documentation and bureaucratic hurdles that should have followed suit are now open to question.
China is Australia’s largest trading partner, base metals and education at one end of the equation, manufactured goods at the other end. The latter may bear a ‘Made in China’ message, but incorporate parts made from all areas of greater Asia.
China must weigh up the many consequences of stifling the relatively tiny Australian wine export trade, whether by re-imposing tariffs or inscrutable asphyxiation by endless levels of bureaucratic interference. Microscopic amounts of naturally occurring minerals with no health consequences previously reported in western health research papers can be banned by China with no warning.
Australia has recently taken Canada (our fourth-largest market) to the World Trade Organisation, and the UK remains happy to buy our cheapest wines at pitiable margins (profitless prosperity), leaving the US as our second-largest export market. Given that the domestic market has only recently emerged from a morass of over-supply (to the delight of the two big dogs in town, Coles and Woolworths) the US may yet prove to be our best export bet. An ironic outcome if it is due to China.
My Wine Companion is being translated into Mandarin... so I have a vested interest in understanding the development of the market. This interest is not simply a matter of the skyrocketing amount of Australian wine being imported, but the way it’s being consumed.