Wine producers in France and Italy may be targeted in a new trade war between the EU and China. So would fewer EU imports open up the potentially massive Chinese wine market for exports from our own South African producers? We asked a few experts.
Expert views:
Jeremy Sampson from Interbrand Sampson:
It is early days in the dispute. But the implications for stopping all exports of French and Italian wines to China would be significant and create huge opportunities for other suppliers – of which South Africa is but one. Of late, the Chinese have been investing heavily in both French and Australian wine suppliers/ estates. To me it is surprising that to date there is no news of the Chinese acquiring any South African estates. That could change, especially as the currency weakens. Those who argue for a weaker currency don’t seem to understand that one of the side-effects is that South African assets become cheaper for overseas buyers to acquire.
Francois Dubbelman from FC Dubbelman & Associates :
If EU wine is targeted, the EU might look at other countries to export to – and this could harm SA wine industry. Same with China – they need to offload their solar panels somewhere – sunny SA might be a good place. Again SA industry, which is small by world standards, might be put under pressure. China is already in the SA market with solar panels. Action against EU wine producers might open demand for SA exports to China – one needs to assess the import duties and non-tariff barriers – and our capacity…
Duane Newman from Cova Advisory:
While the EU and China trade dispute seemed to start with the anti-dumping duties imposed on solar panels, it is fascinating that China chose wine to target. I would expect this was a strategic move by the Chinese as this is a very crucial industry to the EU/French, just like the solar panel industry has become to the Chinese. I believe the Chinese are trying to make a point: "hit you where it hurts". There is clearly an opportunity for SA wine exporters to China. Whether we can take advantage of this trade dispute is debatable as it takes a while to build a market for a country’s wine. The French have a well-established wine brand in China as 20% of their production goes to China. But is clear there is a very large market for wine in China which SA exporters must grow.
+++++Jeremy Sampson comments: 20% of wine drunk in China is from the EU and 60% of that French. That’s 227m bottles. 150% up in 3 years
Mike Schussler from economists.co.za:
Perhaps EU rules and regulations will help South African products in China. I hope they all want more of our excellent wines, and certainly the EU may by mistake open the doors for SA wines into China. Most of our wines are similar to French wine styles, and thus we could see a bit of our wine glut get to a major market which is growing fast. Already luxury goods are seeing major growth in East Asia, helping those firms maintain some growth. Our wines could just get great support from this source!
Martyn Davies from Frontier Advisory:
Regardless of the potential for protective tariffs against wine imports from the EU, South African wine producers should be pursuing far more aggressive marketing strategies in China. We always play second fiddle to European, Australian, American and Latin American wines in China’s burgeoning wine market. We are increasing the sale of wines into China but our presence remains very marginal at best.
Mike Ratcliffe from Warwick Estate added this comment on 11/6/2013 :
At this stage the SINO/EU sabre rattling is purely empty rhetoric – but it could escalate. Having returned from a wine trip to China 2 days ago, the trade is certainly talking about this issue and there are a lot of Franco-focused wine companies that are very worried about it. One could argue that there is currently a growing bias towards new world wines from Chinese consumers driven by the already high European wine prices. Contrary to popular belief, the Chinese wine-drinker is a rational value-seeking consumer seeking the best ‘claret for their buck’. A trade war between the Chinese and the Europeans would no doubt indirectly benefit SA wines, except that there is very little South African vino in China. Our direct new-world competitors like Australia and Chile currently control massive market share for new-world wines and would no doubt capture most of the benefit.
Perhaps it would be more prudent to focus on the fact that Australian and Chilean wines already pay lower import duties than South African wines due to their existing free-trade agreements? In a meeting with Bheki Langa, South Africa’s Ambassador in Beijing a few days ago, the honourable Ambassador told me that a SA/Chinese free-trade agreement is ‘not even on the horizon’. Perhaps SA should be more pro-active than reactive in this regard?
Conclusion:
Some South African wine producers are already working hard on the Chinese market. One of these was unable to comment to us as he is actively promoting his wines on a trip to China! If the supply of EU wines turns from a flood to a trickle, then this may well help the South African industry. Or at least the more nimble and effective marketers.
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