So with China devastating Australian exports with 200% tariffs, Penfolds needs to expand their export markets beyond China. Penfolds, along with other winemakers need to diversify markets out of China and into the glasses of reliable partners.
The Chinese market accounts for 30% of earnings; however, Penfolds will be able to reallocate supply to emerging markets. Whilst the tariffs are set until March 2021, they may be extended to August depending on Chinese indecision and the willingness to punish Australian exporters.
This really gives Penfolds the opportunity to explore new and unsatisfied markets, one has to ask, is China really a trusted partner? If Treasury Wines is able to divest out of the unreliable Chinese market, why would they return when they could suffer the same issues again?
This is a shame, we don’t have an issue with the Chinese consumer, it is the Chinese leadership, or lack of leadership that is the problem. When Penfolds develops new markets, they have the opportunity to step away from the Chinese market and just concentrate on these new consumers.
They have the ability to tell China, thanks but no thanks and supply diversified luxury markets with willing consumers. This is a polite fuck you to the CCP, why should a company like Penfolds deal with such an untrustworthy market? Sure, the Chinese market is lucrative, but Treasury Wines, the owner of the Penfolds brand requires honest conditions to operate.
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