Virus lockdown a risk for WA wine exporters

The impact of the coronavirus on the State’s wine industry is a lot worse than some people are prepared to admit, according to the owner of a leading Margaret River winery.

Howard Park boss Jeff Burch said it was difficult to put a figure on it but there was no doubt the closure of businesses in China because of the virus was flowing through to Australian wine producers.

Mr Burch’s comments come as the ramifications of the problem become more apparent. In China, trade events are being cancelled or postponed.

The biggest is Chengdu’s annual China Food and Drinks Fair, with about 3000 exhibitors, 300,000 visitors and an estimated $5 billion in deals struck. Even group dining such as company dinners and wedding banquets have been banned. Many businesses will almost certainly go broke. Tens of thousands of businesses have not been able to open their doors, but still must meet rent, wages and other outgoings, an unsustainable scenario.

Australians have been warned the viral epidemic could trigger recession.

“In China, the Chinese new year was a non-event with people in lockdown and restaurants shut,” Mr Burch said.

“No one is moving around, and no one is buying wine.

“Wine that was ordered primarily to meet the demand for Chinese new year has not been sold and there is a backlog on the docks, with none of it moving. The pipeline is full, so it is going to take another 12 months to work through once this thing settles down.

“And there is no idea when that might start.”

Mr Burch also said those producers who had shifted their focus primarily to the rapidly growing China market were at risk.

Mr Burch said the online wine sales area was the one area that did not appear to have suffered and in fact may have strengthened as a result.

His comments were echoed by Wine Australia chief executive Andreas Clark, who recently said exports looked positive, but there were growing concerns about the impact on wine sales with Chinese consumers avoiding restaurants and cafes. But he said at this stage it was difficult to predict the degree of impact.

“Looking ahead into 2020, we anticipate that coronavirus will have an impact on sales, particularly to China, but at this stage it is difficult to predict the degree of that impact,” he said.

Treasury Wine Estates, whose Penfolds brand is dominant in China, released its half-year accounts this week saying that “while at this stage it is too early to assess financial impacts, should there be a sustained material impact on consumption, this would impact” this year’s earnings.

One Perth-based WA wine exporting company said the virus had resulted in a significant impact on exports, predicting a 50 per cent reduction in the next six months.