More on the anti-dumping case: the producers, programs, numbers and more involved. Plus, natural wine. And Qixi. If you know others who will find this newsletter helpful, please pass it on.

My next tasting. For those who missed World Marselan Day.
Greetings from Beijing,

Where everyone is still talking about China's anti-dumping case against Australia. My last newsletter was heavy on analysis so I've corrected that below with details from the official document, including:
  • The Australian producers targeted.
  • The aggrieved Chinese producers.
  • The 40 (!) programs, covering everything from export promotion to drought relief, said to give Australian producers an advantage.
  • The association that launched the complaint.
  • And how Australian and Chinese wine are argued as being "similar."

For me, those 40 programs are an eye-opener. If every country that supports its wine industry with such programs is a target, well, pretty much everyone is a target. That could end up including China as its own producers increasingly push into the world.

Also, I'm not sure about some of the media coverage. Australian Financial Review did a story on three of the China's best boutique wineries selling overseas, including in, gasp, Michelin-star restaurants--so maybe the claim of a local wine industry crisis is overblown? I get the point, but it's a bit like dismissing the general impact of COVID-19 on the restaurant and bar scene because three of the better venues are still going strong.

Anyway, I figured it best to get out this info while it's timely, so see below for details.

Also below; a quick ramble about natural wine in China. And a quick primer on Qixi aka Chinese Valentine's Day. Like Valentine's Day, the story behind it isn't all cute and cuddly.

As always, the Grape Wall newsletter and website take time and money. If you find them helpful, please consider helping cover the hosting, event, and other costs. (If we're friends on WeChat, see here. Other options are Paypal, credit / debit card or bank transfer.)

Cheers, Jim Boyce
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The Anti-dumping Dump

The following info is taken from the document detailing China's anti-dumping probe into Australian wine, with my commentary in brackets. Those making business or other decisions about the anti-dumping case best do their own translation and due diligence. This is an expanded version of a post on my blog.

Who initiated the case?

China Alcoholic Drinks Association (CADA), cited as having 122 wine producers--"These members account for the vast majority of total output and are representative and influential in the industry.”

(CADA is very active in promoting the local booze trade, including baijiu, the popular national spirit with some 40 times the revenue of Chinese grape wine–see World Baijiu Day. You will often see CADA reps at key alcohol events, such as trade fairs, in China.)

The document states that CADA took action as, “A large amount of Australian wine has been exported to the Chinese market in recent years, which has caused serious impact and damage to the domestic wine industry.”

(There is little dispute that imported bottled wine, including from Australia, took major share from local producers. The question is whether it is due to unfair practices, to factors like consumer preference, legit marketing strategies and China’s free trade deals with nations such as Australia, or both.)

Who is the target?

Ten companies are listed. No shocker to see Treasury Wine Estates, with a huge slice of Australian imports, listed first. TWE is best-known here for Penfolds, from Grange to entry-level label Rawson’s Retreat, but also other brands such as Wolf Blass.

Others listed include Casella, known for [yellow tail]; Accolade, with brands like Hardys, Banrock Station and Grant Burge; and Australian Vintage, with Barossa Valley Wine Company, McGuigan, Tempus Two and Nepenthe in its portfolio.

The rest of the list includes Yalumba, South Australian Wine Group, The Wine Company, Truffle & Wine, Wangara Wine Group and Stoney Run.

Who are the aggrieved companies?

Those listed include the heavyweights of China's wine industry, headed by Yantai Changyu in Shandong and COFCO Great Wall in Beijing. Those two alone represent the thickest slice of China's production pies, especially Cnangyu, with major production centers in Shandong, Liaoning, Hebei, Ningxia, Shaanxi and Xinjiang.

The list also includes other sizeable producers spread across the country, which I guess highlights this is a China case rather than one limited to a few cities or regions. They included Dynasty from Tianjin city, Tonghua from Jilin province, Xi Xia Wang from Ningxia, Mogao from Gansu province and Moutai from Guizhou province.

Some people might scratch their head at Moutai, since it is China's best-known baijiu producer, but it also has a wine operation. (Fun fact: Moutai's 2019 baijiu revenue easily topped that of the entire China wine industry.)

Anyway, CADA is heading a group with plenty of economic and political clout.

What are the numbers?

The document states that the Australian import volume in question rose by 113% between 2015 and 2019 while the value decreased 13.3%.

It says domestic market share fell from 74.4% in 2015 to 49.5% in 2019, with sales revenue down 68.9% and profits 79.7%. It further lists production as falling from 1.16 billion liters to just 451 million liters, from 2015 to 2019.

(See the last newsletter for more on accuracy and production numbers.)

Of the numbers in general, it says they show “production and operating conditions of domestic industries are deteriorating sharply.”

(Again, the China's wine industry has struggled and many people are frustrated given their wines have improved so much and, at the top end, gained international respect. The issue is whether it is due to unfair practices. Many factors affect price, from currency fluctuations to trade agreements to simple supply and demand to consumer desires. It’s interesting that the China-Australia free trade deal overlaps the period in question. More and more people I talk to think the outcome will be a negation, in one form or another, of the 14% in tariff relief that trade deal provided Australia.)

The document also notes wine consumption is just 0.6 liters per person in China, with great potential for growth. And that, in an attempt to take and expand share, “Australian wine manufacturers do not hesitate to take low-cost price-cutting means.”

What’s beyond the numbers?

The document lists some 40 programs seen to give Australian wine producers advantages, from potential tax refunds to that AU$50 million program from 2017 to 2020, headed by Wine Australia, that supported export efforts–literally known as Export and Regional Wine Support Package.

It also includes other programs and grants that cover everything from cellar doors to irrigation to drought recovery. Even “exceptional circumstances interest rate subsidies.”

Here are a few examples listed: "International Wine Tourism State Grants", "Wine Tourism and Cellar Door Grants", "The Research and Development Tax Incentive" and "Vineyard and Orchard Expansion Programs" along with programs that specifically site places such as Victoria, Riverland and Tasmania.

What else?

It’s interesting how the document argues wines from China and Australia are “similar products.” It states stylistic and other factors differ in wines but they share a similar base material in grapes–and specifically that many of the varieties used in Australia and China share similar origins, such as being from Europe.

The similarity argument also extends to production processes, end uses (for drinking, naturally!) and sales channels.

I'm not sure how Australia producers will feel about having their wine being seen as "similar" to some of the stuff made by the local companies listed. Chinese wine as a whole has improved, and we especially see intriguing products at the top end, but I've also tasted sub-par stuff over the past years that retails for far more than Rawson's Retreat. I'm not going to dig out the old joke that drinking Dynasty means you will "die nasty", because its wines have also improved, but the typical Australia wine is more consistent and of better quality.

Anyways, this case is interesting due to the precedents it might set. The sorts of programs listed that support Australian wineries, including for export development or irrigation or [insert blank here], are also found in many other regions / countries, thus making them potential targets. And how might that impact China's more ambitious producers, already exporting more wine, with aspirations to gain space on store shelves, restaurant lists and e-commerce shop portfolios abroad?

Okay, time to take a break from this topic for a while.

'Super contagious'

Natural wine's supposed moment in China is enduring. I wrote about this scene for Meininger's way way way back in, er, October, and was far from the first. And, especially over these past few months as the COVID-19 crisis eased, I've seen more and more WeChat posts about natural--and organic and orange and biodynamic and anything other than classic--wine pop up. And more natural wine on restaurant lists and in promotions, too. Frankly, it's good to see people this enthusiastic about *anything* to do with wine.

Shanghai-based Simone Incontro of Veronafiere says the trend inspired him to add a dedicated natural wine section called Living Wine to the inaugural Wine to Asia fair slated this November in Shenzhen.

Anyway, natural wine et al seems as divisive here as in other places.There are people who love it. People who hate it. And even a few in-between.

Vicente Muedra of Sommelier International, who added natural wines to his Spanish and Australian portfolio, says natural wine has legs.

"It's trendy for young people, for millennials, you can feel that," he says. "People are definitely super energetic and interested [about the wine]."

Those sentiments are not universal. While natural wine is popular with younger consumers, wine bars and some of Muedra's private clients, most of his older customers, who are used to a more classic style of wine, are a different story.

"They find it unfamiliar," says Muedra. "One of the comments for one our most successful wines, an orange wine, is that is smells like beer, it's very strange."

But Muedra says overall the immediate future is bright.

"There is trend of growth for sure and it's going to keep going," he says. "It's super contagious."

"Everybody wants to have those wines," he explains. "It's like a signature thing, they want to be cool, to attract customers, to have a fresh approach. You can't avoid the movement, even if you don't like it, you need to have this."

While Shanghai is the focal point for the movement, we see interest in Beijing, too, a city that gravitates more to beer and spirits.

Two weeks ago, Jinglin Zhang of Italian natural wine importer Grape Paradise organized a tasting at Tap Bar. This relatively new natural wine bar featured over 20 labels, including producers such as Alessandro Viola, Marilina and Maliosa. Attendees paid rmb68 per glass, which translated to a higher fee than many of the drink-fests in town, but also under-scored a clientele willing to pay for interesting wines.

Anyway, I meant to focus more on natural wine this year, but a virus crisis got in the way. I aim to get back on track.


Love is hard

Today is Qixi also known as "Chinese Valentine's Day."

I see lots of observers outside this country discuss China and wine and holiday sales in relation to Chinese New Year and the mid -Autumn festival and Qixi but who might not know much about these specials days.

So here's a quick take on Qixi that I wrote for CHEERS wine. (A follow-up to my Don't Bring a Kitten to Fight a Tiger post). And like the story behind Valentine's Day, it's not cute and cuddly.

In short, Qixi is a classic rich girl-poor boy story. But about a thousand times crazier.

In short, a bored--and single--cloud weaver in the Heavens decides she needs a life change and journeys to our tiny planet. She marries a cow herder, has children and almost lives happily ever after.

Except her Mom, the Empress of Heaven, finds out and is none too pleased that her lovely daughter married a mere human. She dispatches the equivalent of the Space Army to bring her girl home.

Then things get crazier.

The farmer's Best Ox sees the family is sad and starts to talk. Yes, a talking ox. The ox basically says, "If you guys kill me and wear my hide, then you can fly to the Heavens and reunite."

The plan works. Almost.

The Mother-in-Law from Heaven / Hell finds out just before the lovers can reunite. She uses a hairpin to scratch the heavens and create a Silver River--we call it the Milky Way--and keep the pair apart.

Then things get crazier.

Billions of birds--magpies--fly up to the Heavens. (How did these birds survive? Tiny space suits? We do not know.)

The birds create a bridge over the Silver River so the lovers can finally meet and enjoy--to be confirmed--a bottle of Champagne.

Why Champagne? Because when 17th-century monk Dom  Perignon first tasted this bubbly wine, he exclaimed,  "Come quickly, I am tasting the stars!"

Seem appropriate. Also, why not?

And obviously I am making this part up, but I also suggest following that bubbly with Mad Bird Dark Malbec from Argentina, a wine with a name that salutes those crazy magpies, a wine that is nearly as deep in color as deep space, a wine that would pair nicely with a dish that pays tribute to the animal that made a reunion of lovers possible--braised oxtail stew.

Happy Qixi everyone. And be thankful your love life is much easier.

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Cheers, Jim Boyce
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Note: This newsletter content is general info. I make no guarantee as to its completeness or accuracy. Use it at your own risk. In other words, I try hard to be accurate, but mistakes can happen, so reader beware. Also, I'm not a fan of spam and aim to send this newsletter only to people who signed up at Grape Wall blog or agreed by email or in person to receive it. Cheers, Jim Boyce
25 August 2020
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