A Consumer Backlash Unleashed?
On April 2 the Chinese Ministry of Commerce announced that it would be going ahead with their proposed tariffs on 128 U.S. products, including an additional 15% tariff on wine. The move was in retaliation to U.S. President Donald Trump’s plan to impose tariffs on $60 billion worth of Chinese goods coming into the U.S.
The following are the extended remarks on the matter given to Wine Spectator, for their piece published March 29, by Nimbility Founding Partner Ian Ford.
“The 15% increase in tariffs on USA wine will be significant, but it pales in comparison to the consumer backlash against USA wine that is likely to occur if the tariffs go through. With the tariff the Chinese government is signalling to the Chinese population a desire to punish USA wine as a category, and the Chinese are likely to fall in step and enthusiastically embrace a de facto boycott. The impact of the consumer backlash to USA wine will be vastly greater than the price impact of the increased tariff. We witnessed here a similar phenomenon in China when the government took action against South Korean imports as a reaction to their proposed missile defence system. The consumer backlash unleashed against Korean products and brands was substantial and had a material impact on their sales into China.
The China wine market is currently running at just under 63 million 9 litre cases of bottled imports annually, as of 2017. If you include Hong Kong, the value of the Greater China market is closer to USD5 billion. It is one of the top three destinations in the world for wine, and the number one market for Australia and France. This is a market that USA wine exporters need to get right. Despite enthusiastic effort by the USA wine industry, the USA today with just over a million 9 litre cases in shipments, lags far behind Australia and Chile in terms of wine sales into China, a situation that is likely to be severely compounded by this planned action by the Chinese government. One silver lining - the average price of a bottle of USA wine into China is the highest from any major country in the world, at US$7.85 per litre average, overtaking Australia in 2017.
If the 15% tariffs go through, it will be all hands to the pumps required on the part of all major players in the USA wine industry to offset the backlash in China and to try to maintain forward progress in building a strong and sustainable USA wine market.”