Treasury Wine Estates sees success in China
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Treasury Wine Estates sees success in China

According to Wine Australia, the relative organization for that industry in that part of the world, total wine exports from Australia into China surged by 51% in the year ended March 31 to a massive $1.04 billion. This is great news for Treasury Wine Estates (TWE), which is leading the charge by targeting the country’s emergent middle class and playing into its taste for luxury experiences.

Treasury Wine Estates’ share price has risen by 9% so far this year

graph 1704 treasury wine

SOURCE: Yahoo Finance

TWE owns the two biggest selling Australian wine brands in China, Penfolds and Rawsons Retreat. It also has the fifth spot covered with Wolf Blass. These wines are selling brilliantly worldwide – Wine Australia says that Australian exports are up by 16% overall – but, as with so much else in the luxury world at the moment, China is a driving force.

In the case of wine, China’s sudden increase in appetite is at least partially down to the dropping of certain tariffs under the China-Australia free trade agreement. This came into force in January 2018, and therefore signals more good news for an already positive industry trend.

Andreas Clark, Wine Australia’s chief executive, noted that tariffs would be removed completely in January 2019, giving Australia an important competitive lead over France, Italy, and Spain when it came to accessing the Chinese wine market. This market includes Hong Kong, Macau and Mainland China, and Mr. Clark summed its progress up thusly:

"There was very strong growth at all price points as imported wine becomes more approachable and is increasingly consumed by middle-class drinkers and seen as suitable for consumption at informal gatherings and while relaxing at home."

When you add in the recently touted possibility of TWE making an acquisition (Macquarie highlighted several options last week), things are looking pretty rosy for the world’s largest freestanding wine maker.

Disclosure

Dominion holds Treasury Wine Estates in its Global Trends Luxury Fund.


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