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Two years after the imposition of tariffs by the Chinese government that threatened to destroy its huge Chinese business, Penfolds is launching a wine from the Ningxia region under its own brand. Robert Joseph reports.

China’s wine industry is about to get a major boost – thanks to Treasury Wine Estates (TWE), the Australian giant which – until the imposition of tariffs by the Beijing government – was by far the biggest single exporter to that country.

That success was almost entirely reliant on Penfolds, a once quintessentially and exclusively Australian company that, alongside Lafite, became one of China’s strongest wine brands.

In recent years, Penfolds has evolved to include wines produced in California and France – in the shape of Champagne and a Bordeaux to be launched this year. The company also dipped its toes into using Chinese ingredients when it launched its ‘Spirited Wine’ which blended Australian wine with Baijiu spirit.

Now, working with the hugely powerful China Alcoholic Drinks Association Penfolds is to launch its first made-in-China wines. The company has declined to reveal where the wine is produced or even its vintage, beyond saying that it is "predominantly made from Cabernet Sauvignon grapes grown in the Ningxia region" and will be priced at RMB 140-235 ($21-35).  The ultra-modern, luxury, 25,000 square metre, egg-shaped, Xige Estate/ Pigeon Hill Ningxia winery firmly dismissed initial rumours that it had any involvement in the project, despite its founder's background as the highly successful Chinese distributor of Penfolds Max wines. 

Discussing the launch with the Chinese-based Vino Joy publication, Penfolds MD, Tom King, described the initial release of the new wine as a 'trial' which would allow the company to 'step up experience and engagement' in the Chinese market. The company, he said, had been looking at making wine in China but had accelerated the process after the imposition of the tariffs.

If speculation continues to surround Penfolds' winemaking partners the relationship between between TWE and CADA may be even more significant. As Jim Boyce of Grape Wall of the China blog, points out, the press release concerning the new made-in-China wine states:

"TWE and CADA work together to build China’s fast-growing wine industry capability. The partnership will involve technical knowledge and expertise exchange in China wine region development, programs to champion wine education and wine culture, and brand support for the development of world-class quality, integrity, and valuation systems for Chinese grapes and wine.”

TWE wants and needs to regain its Chinese market. CADA wants and needs to build a domestic industry that currently sells less wine than is imported from elsewhere. The joint venture may be an answer to both – and quite possibly a challenge to France and Chile which have benefited from the removal of Australia from the Chinese market, as well as to China’s biggest domestic producers, the publicly quoted Changyu and government-owned Great Wall. 

When a kangaroo mates with a pigeon, the offspring may threaten dragons.