Penfolds in China: 10 secrets of a risky expansion

Penfolds ’ expansion into China marks a new era for the Australian wine giant. As wine enthusiasts, we’ve been watching with interest as this bold strategy reshapes the Asian market. In 2019, Australia exported $750 million worth of wine to China, with Penfolds alone accounting for 30-40% of that colossal amount. This dramatic breakthrough is testament to the growing appeal of New World wines in the Middle Kingdom.
A strategic acquisition in Ningxia
Penfolds owner Treasury Wine Estates (TWE) has agreed to acquire 75% of Stone & Moon Winery in Ningxia. The deal, valued at $18 million, is part of a local expansion strategy aimed at regaining market share following the lifting of prohibitive tariffs on Australian wines.
The choice of Ningxia is not insignificant. This region, often compared to Mendoza in Argentina for its climate, is renowned for its full-bodied and ripe wines , mainly made from Bordeaux grape varieties. On the other hand, this orientation could pose challenges in the face of the evolution of the tastes of Chinese consumers, who are increasingly turning to lighter white wines and reds.
We had the opportunity to taste some of Stone & Moon's wines during our wine-tasting journeys, and it is clear that their quality is promising. Two of their vintages are already in the Top 100 Chinese wines, at 41st and 59th places respectively.
Penfolds expertise at the service of Chinese viticulture
Penfolds’ arrival in the Chinese wine landscape brings valuable expertise. The Australian brand has already proven itself with the launch in 2022 of “One by Penfolds”, a blend of Cabernet Sauvignon and Marselan from different estates in Ningxia. This prior experience on the local terroir will undoubtedly be a major asset for the integration of Stone & Moon into the TWE fold.
A key challenge will be to reconcile Penfolds’ house style with the unique potential of Stone & Moon. Striking this balance will be the delicate task of Stephanie Dutton, Penfolds’ Senior Oenologist for Vintages Outside Australia. Her expertise will be instrumental in crafting wines that embody both Australian heritage and Chinese terroir.
Here is an overview of the grape varieties cultivated by Stone & Moon:
Red grape varieties | White grape varieties |
---|---|
Cabernet Sauvignon | Chardonnay |
Malbec | |
Marselan | |
Merlot | |
Syrah |
Challenges and opportunities in the Chinese market
Penfolds’ investment in China comes amid a growing economic patriotism , known as “guochao”. This trend favours local products, including in the wine sector. As discerning wine enthusiasts, we see that despite the general difficulties of the wine industry, interest in quality Chinese wines continues to grow.
Penfolds will face increasing local competition, however. Its next-door neighbor, Xige Estate, dubbed the "Penfolds of China," could prove a formidable rival. With its wide range of wines, from entry-level to $400 premium vintages, Xige Estate is adopting a strategy that is eerily similar to Penfolds'.
Penfolds’ expansion into China is part of a broader trend of disruption in the wine world , with new players challenging established hierarchies. The dynamic is reminiscent of the rise of New Zealand red wines on the international stage.
As wine enthusiasts, we are excited to see how this fusion of Australian expertise and Chinese terroir will shape the future of wine in Asia. Penfolds’ venture into China promises to be as captivating as a complex grand cru, with its subtle notes and unexpected aromas. It remains to be seen whether the Chinese market will appreciate this bold new blend of tradition and innovation.