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· Posted on
May 20, 2022

Treasury Wine Estates is doing a shimmy around China's tariffs by producing its famous Penfolds in China itself

The wine producer should be able to avoid tariffs AND quash the grey market.

What's the key learning?

  • The grey market refers to unauthorised parallel imports.
  • Unlike the black market, the grey market isn't necessarily illegal.

👉 Background: Treasury Wine Estates is one of the world's biggest wine companies, famous for its seriously juicy reds under the Penfolds brand 🍷. Ya know, like their famous Grange bottles (which can go for $1,000 a pop!).

👉 What happened: Treasury Wine used to be the biggest exporter of wine to China. That changed when China slapped a massive 175% tariff on wines produced in Australia. The company's sales and profit took a big hit as a result.

👉 What else: TWE have cooked up a fruity plan to side-step the tariffs. They're planning to release a Penfolds vintage made within China. A large reason for this move is to put a stop to the grey market for Penfolds in China.

🔔 What's the key learning?

💡The grey market, also known as parallel importing, is where authentically branded goods are sold to consumers through unauthorised channels.

💡This market exists where there's demand for certain goods, but they're either not readily available or they're super expensive through legit channels. In China, there's a strong grey market for infant formula, cosmetics... and Penfolds wine.

💡Unlike the black market, the grey market isn't necessarily illegal, but it's not good for brands. Because there ain't a lot of clarity around what goes on in the grey market, its earnings are generally deemed lower quality. So, TWE's move works double: against tariffs and the grey market.

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