Chinese investment into Australian wineries can only be beneficial for the industry as a whole, writes Jeremy Oliver.
Writing as an Australian patriot, I could not be less concerned at the fear being drubbed up in sections of the Australian media and clusters of politicians over foreign, especially Chinese purchases of this country’s agricultural land. The concerns most often raised are ‘losing control of our agricultural productivity’ and putting at risk such things as our revenue base, the balance of our commodity and capital markets and even our national sovereignty.
A company – be it from China, the US or the UK – buys Australian land to produce a primary product for sale in its own market. In doing so, that company satisfies the requirements of the Foreign Investment Review Board (provided the purchase is valued at $248 million or higher to be caught in this net), invests capital into Australia (something very few Australian companies are currently doing), employs Australian people, pays Australian taxes and through its promotion of Australian produce in overseas markets tells a quality story about Australia that spins value off towards a multitude of other Australian exports. And regardless of who owns the land, the company can’t take it back home with them and has no alternative but to follow Australian law.
Right now a large and ever-increasing number of Chinese individuals and organisations are contemplating buying vineyards and wineries in Australia. There are reasons for this aplenty:
1. Many corporations are already privately buying large volumes of Australian wine and wish to shore up a guaranteed source of supply.
2. Many China-based wine importers are seeking a promotional site in Australia – a country considered by Chinese people to have a very clean and green environment – as a showcase for their business and to demonstrate to their top Chinese customers that they do in fact own a property of considerable beauty and prestige. Typically, these sites are small, picturesque, satisfy Feng Shui requirements and do not produce wine of significant quality or quantity (these aspects are of less relevance in this case).
3. Serious players in Chinese agribusiness, food supply or aquaculture wish to take advantage of their existing infrastructure by bolting into it a wine-producing business. Groups such as Bright Foods, COFCO and China Resources can be mentioned in discussions of this nature. Some of these groups already have strong wine-related assets and at various times have expressed an interest in very significant purchases within Australia.
4. High net worth Chinese entrepreneurs view the wine industry as a place to be right now, given the rise of the wine markets in HK and the Chinese mainland and the levels of connection that wine can open up. There’s no doubt that some are seeking purchases at bargain basement prices and below, but nobody is forcing a vendor to accept any offer from any quarter; it’s a free market. In reality, the increasing interest shown by Chinese in Australian wine properties has some potential to push up prices over the next few years. I’d add at this moment that the greatest recent bargain in Australian wine was bought by Australians, and not Chinese – when the Ryan family bought the Victorian name and assets of Mitchelton from Lion Nathan in 2011 for what officially remains an undisclosed but indeed remarkably accessible price.
5. Other Chinese entrepreneurs in wine see a base in Australia as part of a global strategy. New owners of properties in Bordeaux and the US are slowly shifting their focus towards Australia to balance a wine brand portfolio.
6. High net worth individuals wishing to find a means by which to secure permanent residency in Australia. We might see more of this under the Significant Investor Visa scheme.
Typically, given the results of the investments made by Chinese in Australian wine to date, the more serious companies to have been purchased receive strong investment as well as being tapped straight into strong market channels in China. Gemtree (McLaren Vale) and Ferngrove (Frankland River) are two flourishing examples of this.
William Dong, the Sydney-based owner of DMG Fine Wine, itself the owner of the Handpicked and Two Eights brands, has recently acquired vineyards in the Barossa Valley and Mornington Peninsula. With a sales network throughout Southeast Asia and also into China via his brother’s distribution business, it makes perfect sense for Dong’s business to shore up its quality fruit supply with acquisitions of vineyards and wineries. The accessibility of strong networks into China such as this provide huge opportunities for Australian wine brands as well as for wine brand Australia.
The Adelaide-based brokerage and advisory firm of Gaetjens Langley, which operates the Wineries for Sale website, recently added Stephen Strachan, the former CEO of the Winemakers Federation of Australia, to its team. The company’s site is currently advertising a number of well-known wineries including Bleasdale (Langhorne Creek), the Heathcote Winery (Heathcote) and Hollick (Coonawarra).
Director Toby Langley says the firm has had a joint venture in the China region for around three years – with the experienced Roland Yap – and that modern buyers from China have a better understanding of what they are looking for.
“We have noticed a definite swing in the last two or three years from the high net worth individual buyer to genuine corporate interest,” he says.
“I guess that’s something we anticipated, but it’s encouraging to know that we are being taken seriously at a very high level. One SOE we are in discussions with over a winery in a very well-known wine region is a $200 billion-plus organisation. Now this has started, I expect it to grow further.”
With our major historic wine markets of the UK and US operating at very low levels of profitability (as we find today with many industries that historically sold most of their exports to these markets), it’s critical for Australia to understand who will be buying its product into the future and how best to engage with these parties, in a way that deepens relationships and brings benefit to all parties. Chinese investment in Australian wine is a very good thing. ■
*Jeremy Oliver is the author of best selling guidebook, the Australian Wine Annual and Wine with Jeremy in Mandarin. To learn more visit: www.jeremyoliver.com.au