Australian winemaker circumvents Chinese tariffs by 218%


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Australia’s largest wine producer plans to significantly expand its business in China using shipments from other markets to circumvent low tariffs imposed by Beijing on exports from the Pacific state.

Accolade Wines, owner of popular brands Hardys and Echo Falls, said he would ship wine from Chile and elsewhere to China, allowing him to bypass customs to 218 percent imposed in November after rising diplomatic tensions.

As a result, Australian wine exports to China sank 96 percent year-on-year, to just $ 12 million between December and March, according to data from Wine Australia, a government body.

The plan is part of the efforts of Accolade, which it was bought by private equity group Carlyle for $ 1 billion ($ 778 million) in 2018, to expand beyond its core Australian and British market and sell more premium wines.

The company is also considering an initial public offering, and Hong Kong is a potential venue.

“We think we can get a significant stake in China,” said Robert Foye, CEO of Accolade, who acknowledged that the company has slowly jumped into China’s decade-long wine boom. “I just think so [Accolade] he didn’t have that global management team that really knew how to run a business. “

Foye believes the Chinese wine market could grow for another 15 years due to low per capita consumption and a growing middle class.

The line chart of export values ​​(million US dollars) showing Australian wine exports to China has failed

Accolade, which generated $ 1.2 billion in turnover last year, also aims to boost sales in Asia, the U.S. and other markets, Foye told the Financial Times.

Matthew Reeves, an analyst with research group IbisWorld, said smaller Australian producers were hard hit by tariffs, but that the country’s largest winemakers had managed to procure products for the Chinese market. from elsewhere.

“Accolade has the support of private capital, so their sustainable strategy is to import into China from other locations,” he said.

Foye, who built a successful Chinese business as chief operating officer at rival company Treasury Wine Estates before being fired for unspecified internal policy violations, said Accolade had compiled a list of acquisition targets. The company has brands in Chile, the US and South Africa and wants to add more premium wines suitable for Chinese palate, like reds with a fruity, sweeter taste, he said.

Accolade has bought two top Australian wineries, Rolf Binder Wines and Katnook Estate, over the past year.

However, Foye acknowledged that Chinese tariffs would slow its expansion, as most of its production was based in Australia.

Accolade aims to increase sales to markets outside the EU and the UK to 60 per cent of the group’s total value within three years, up from around 40 per cent in 2021.

The winemaker made a loss of 11.6 million US dollars in the year to June 2020, the accounts showed.

The leverage reached nine times higher earnings than 2020 before interest, taxes, depreciation and amortization, according to Moody’s Investors Service. The rating agency reduced Accolade’s parent debt to B3 from B2, deeper into a speculative rating, just over a year ago, citing more-than-anticipated restructuring costs, production problems and a coronavirus pandemic.

Foye said the group had forecast earnings growth of 25 percent for the year to June and was considering listing.

“I want to make an IPO. And that’s what we’re going to do at Accolade Wines. So we’re going to do that in the next two to three years either on the Australian stock exchange or I’d actually like to do that on the Hong Kong stock exchange. “

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