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JAEPA continues to deliver benefits

Market Bulletin | Issue 102
Photo: Adobe Stock
10 Apr 2018
tagged with JAEPA , Japan
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Last week, Australian wine benefitted from the fifth scheduled tariff cut for bottled wine exports under the Japan–Australia Economic Partnership Agreement (JAEPA), taking the tariff from 15 per cent to 5.6 per cent.

The Japan market remains a challenging one for Australia, but the reduction in the import tariff is creating opportunities for Australian wine.

The steady effect of JAEPA

JAEPA entered into force on 15 January 2015, and the key outcomes for the Australian grape and wine community were the immediate elimination of the tariff on bulk wine and the elimination of the 15 per cent tariff on bottled wine by 1 April 2021.

The fifth tariff cut on bottled wine on 1 April 2018, provides Australian wine exporters with a further boost to their competitiveness in Japan, with three more cuts scheduled before the tariff is eliminated.

Bulk exports immediately increased in 2015, however the growth in bottled exports has been more gradual, from $32 million in 2014 to $38 million in 2017. Overall, Australia’s wine exports to Japan increased by 3 per cent in 2017, to reach $47 million, the highest level since 2009.

Growing sales

Japan is Australia’s fourth biggest export destination in Asia by value behind China (including Hong Kong and Macau), Singapore and Malaysia, but it is ranked second by volume.

Australia ranks sixth in the Japan imported wine market behind Chile (currently 1.2 per cent tariff), France, Italy, Spain (which will eventually benefit from tariff reductions through the European Union-Japan Free Trade agreement) and the USA.

The International Wine and Spirit Record (IWSR) expects Australia to be one of the few imported wine countries to increase sales in Japan over the next five years, predicting a growth rate of 2 per cent per annum through to 2021.

Perceptions on the rise

The growing optimism for Australian wine among the trade and media in Japan was evident at the annual Australian Wine Grand Tasting co-hosted by Wine Australia and Austrade in Tokyo last September. More than 800 guests attended the event, up by close to 30 per cent on the previous year.

Speaking about the event, Japan Times columnist Melinda Joe, said, ‘The tasting was a fantastic invitation to the world of contemporary Australian wine. In terms of quality and diversity of styles, it seems that there has never been a better time. There were a lot of wines with freshness, poise and complexity.’

This positive sentiment is supported by research by Wine Intelligence, which shows that the quality perceptions of Australian wine among regular wine drinkers in Japan is on the rise (see chart below).

Quality perceptions of Australian wines (mean score from 0-10)
Base = Regular wine drinkers who have drunk Australia wine in the past 6 months


 

Furthermore, the image of Australian wine among regular wine drinkers has improved markedly in recent years. For example, in 2010, only 60 per cent of regular wine drinkers believed that Australian wines were food friendly and 65 per cent said they were good value for money. However, in 2017, the share of regular wine drinkers who agreed that Australian wines were food friendly and good value for money had increased to 84 per cent and 80 per cent respectively.

Wine Australia’s Senior Manager – Regional Development Asia Pacific, Hiro Tejima, said ‘Being one of the few French-schooled wine markets, Japan has been a difficult market for some Australian wine exporters, while for some others it has become a steadily successful market.

‘The main advantage for Australian wine in the Japanese market is the progressive tariff reduction through JAEPA, which is helping us compete against Chile now and will keep us competitive with the European Union countries in future, once the European Union–Japan Economic Partnership Agreement is ratified.

‘However, the competition against those countries will intensify as Chile focuses on increasing premiumisation and French wines become more affordable. Therefore, we must continue to educate and engage with the trade and consumers about Australian fine wine and encourage them to keep discovering the diversity we have to offer in our wine. We must remain wise and patient in a market where wisdom and patience is expected.’