Treasury Wine Estates, Australia's largest wine producer, reacted to China wine tariffs by pivoting away from its reliance on China in favor of more other markets.
The company is being hit the hardest by the punitive "anti-dumping" tariffs, which range from 107.1% to 212.1%. Treasury Wine's various vintages were hit by levies as high as 169.3%, the highest so far among the wine companies named by China.
As a consequence, shares in Treasury Wine fell 12% in trading Monday to their lowest in more than three weeks on the ASX. Treasury Wine's shares have lost more than US$1.18 billion (A$1.6 billion) in value since Thursday.
Almost one-third of Treasury Wine's earnings in fiscal 2020 came from China. The company said demand in China from now on will be "extremely limited" because of the tariffs.
"We are extremely disappointed to find our business, our partners' businesses and the Australian wine industry in this position," said CEO Tim Ford.
"There is no doubt this (tariffs) will have a significant impact on many across the industry, costing jobs and hurting regional communities and economies which are the lifeblood of the wine sector."
Treasury Wine Estates said it will now market its Penfold Bin and Icon wines, which account for a quarter of its world volume, in other markets such as Australia, the United States and Europe.
It also said future vintage intakes will also be reduced starting 2021. It will also strive to cut overhead and supply costs.
The hastily levied wine tariffs are widely seen in Australia as China's retaliation for a spate of Australian political and business decisions China sees as quite unfriendly.
Among these moves are Australia's push for an independent inquiry into the origins of COVID-19 and its decision to ban Huawei Technologies Ltd from Australia's 5G mobile network.
China began an anti-dumping probe of Australian wine imports in August as relations between both countries speedily tumbled downhill.
China, however, keeps denying its banning of copper, coal, barley, wine, sugar, lobster and timber imports from Australia are any form of retaliation. Its Foreign Ministry earlier this month said it wasn't increasing pressure on Australian exporters to bring Australia to heel.
Its spokesman claims China conducts "friendly cooperation with other countries based on mutual respect," an indirect way of saying that since Australia is disrespecting China, China can disrespect Australia back.
Australia remains the top exporter of wine to China. Wine Australia, the industry association, said wine exports to China jumped 12% in 2019, to a record A$1.28 billion for the calendar year. This boost cemented Australia's position as the top exporter of wine to China with a huge 35% market share, and ahead of France's 29%.
China has been Treasury Wine's growth engine as Chinese consumers developed a strong enthusiasm for the company's red wines, in particular, its famous Penfold label. In fiscal 2018-19, Treasury Wine's revenue in Asia (including China) jumped a hefty 36.8% to A$748.9 million.
