Weighed down by punitive China tariffs, Weilong puts Aussie vineyards on sale

AUSTRALIA – Weilong Grape Co, the third largest wine producer in China, has announced plans to sell its vineyard holdings in Coomealla and Nyah in Murray, estimated to be over 427 hectares.

Weilong, also China’s biggest organic winery, accounts for 76% of the total wine produced in Australia.

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The sale includes 167.55 ha of vineyards in Coomealla and 260.41 ha in Nyah and other associated assets, for AU$26.6 million and AU$44.4 million, respectively.

According to a statement released by Weilong, the sale of the assets will “alleviate its financial and managerial stress for its Australian subsidiary”.

The Shandong-based Chinese wine producer bought the vineyards between 2016 and 2018 in what was described as Murray’s “biggest investment in a decade”, Executive Officer of Murray Valley Wine Growers, Mike Stone said.

During that time, China was Australia’s biggest and most profitable export market, and robust demand spurred a winery buying spree from Chinese investors.

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Riding on the growth wave, Weilong in the past few years purchased about 600 hectares of vineyards also in Victoria and New South Wales.

The Chinese company also built a brand-new 26,000-tonne capacity winery just south of Mildura “with plans for future expansion”, it announced at the time.

The company was targeting to ship Australia-made wines back to the vast Chinese market.

The Chinese winery said its facilities in Australia would eventually crush 170,000 tons of grapes a year which led the company to reportedly raise AU$120 million for the Australian wine project. (AU$1:US$0.68)

However, the dreams came to a crashing halt when China went ahead to formally introduced up to 218% punitive tariffs on Australian wines in 2021, corking AU$1.2 billion in Australian wine exports to just AU$214 million within a year.

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This is the first major selloff from a Chinese winery after these crushing punitive tariffs have made it nearly impossible to ship Australian wine back to the Chinese market.

Australian Swan Vintage, the Chinese-owned Australian winery, and creator of Auswan was also caught in the wine market friction between the two countries.

Since 2021, the company has diversified and pivoted its business away from selling Australian-made wines to China.

It has launched Baijiu products and announced the production of locally made Chinese wine in Ningxia as a way to work around the tariffs.

But for Weilong Grape Co, the financial weight of punitive tariffs has proved to be too heavy.

In June, a spokesperson of Wine Australia made announced the company’s “difficult decision” to close its physical office in Shanghai citing the current environment and market opportunities are not conducive.

According to Wine Australia, the Asian market is still highly valuable beyond China, with South Korea identified as a top performer.

India is also described as a “potential future market”, despite its 150% tariffs (China’s are 116-218%).

With such potential market growth, Wine Australia pledged to continue to maintain its brand presence in China via its wine trade and consumer-facing social media channels.

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