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Treasury Wine Estates & other Oz vintners boosted by Australia/China Free Trade Agreement

“Australian wine exported to mainland China is continuing to grow rapidly, aided by the China-Australia Free Trade Agreement. We see more positive momentum to come as the underlying demand/supply dynamics remain strong. Export data shows that wine exports of above $10 FOB (masstige and luxury) are steadily increasing particularly to China which shows a similar trajectory.

“TWE should benefit from a step reduction in tariffs from 14% to nil by FY19 as a result of the China-Australia Free Trade Agreement (it has recently fallen from 8.4% to 5.6% on 1 January, 2017). A reduction in tariffs to nil over the next two years should continue to make Australian wines attractive to Chinese consumers.”–Bank of America/Merrill Lynch

 

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Source: Bank of America/Merrill Lynch analyst report, Jan 23, 2017

 

“TWE has built up a distribution model in China and Northern Asia where it has full control of its customer base and inventory position. There are high barriers to entry in producing luxury wine, and TWE’s competitors (notably the French) are producing less wine; not more. We see TWE’s strategy and position in China being highly favourable.”