A reopened market deserves a ceiling

In late 2020 Tarrowin lost almost all its sales in the Asian market that had become our largest. The anti-dumping duties applied to Australian bottled wine from then until early 2024 were high enough to end the trade for nearly every producer. Our revenue there fell from A$124 million in FY2020 to A$6 million two years later. I had spent four years in Singapore building that business, and I had presented its growth to our board as a success. In a narrow sense it was. In the sense that matters to a board, it was a concentration of risk that nobody, including me, had priced.

When the duties were removed, the industry's instinct was understandable: go back, and quickly. Distributors who had waited four years wanted wine. Competitors were already shipping. The margins on premium red wine in that market were better than anywhere else we sold. My argument to our board, and the one I would make to any exporter in a similar position, was that a reopened market is not the old market restored. It is a new market with a known history of closing, and it deserves a ceiling.

What the closure actually cost

The obvious costs were in the accounts. We wrote down A$21 million of wine that had been labelled for that market and could not easily be sold elsewhere, and group EBITDA fell by about a third between FY2020 and FY2022. The larger cost was strategic and harder to see. Because one market had bought so much of our best Barossa and Coonawarra red, we had neglected others. Our Korean and Japanese distributors had received whatever was left after the largest market's allocation. Our British business had been run for volume rather than price. When the closure came, we had to rebuild relationships we had treated as secondary, at the worst possible moment to ask anyone for a favour.

We did rebuild them. Between FY2021 and FY2024 our sales elsewhere in Asia grew from A$23 million to A$58 million, through new importers in Vietnam and Thailand, a better arrangement in Korea and patient work with restaurant groups in Singapore and Japan. Those distributors took our wine when it was not fashionable to, and some carried stock we could not otherwise have sold. They are a large part of the reason we came through the closure without breaching our banking covenants.

So when the reopened market's distributors asked for 260,000 cases in the first year, worth roughly A$70 million, the question was not only whether we could make money from the order. It was also who would go without. Our scarcest wines are finite. Every case of Ostrey Range shiraz shipped to a returning distributor was a case not offered to an importer in Seoul who had stood by us. Exporters talk about markets as though they were independent of one another. For a premium producer with limited fruit, they compete for the same bottles.

Allocation is a pricing decision

The proposal I took to the board in 2024 had two parts. No single export market would exceed 20 per cent of export revenue. And our scarcest wines would be allocated first to the markets that had kept buying during the closure, with the returning market receiving a fixed share that would grow only as the total grew.

The cost was set out plainly. We would decline about A$28 million of orders in FY2025, and at least one former distributor would probably move to a competitor. One did, within six months. Our chief executive and our head of Asia argued for a much higher limit, and their case was serious: the margins were real, competitors were taking share, and a cautious return might look like a lack of confidence to the market's buyers. The board heard both cases and approved the limit.

What followed surprised some of my colleagues more than it surprised me. Because we offered less wine than the market wanted, we could charge more for it. By FY2026 our average price per case there was 14 per cent above the FY2019 level, and the market had grown to A$42 million, 18 per cent of export revenue. Allocation is a pricing decision. A producer that ships whatever is ordered invites its distributors to discount; a producer that rations its best wine teaches them that it is scarce, and they price it accordingly.

Putting the limit where the board can see it

The last part of the argument concerns governance rather than trade. A concentration limit that lives in a strategy document will be forgotten the first time a large order arrives. Ours sits in the board's risk appetite statement, and I report against it to the Audit and Risk Committee twice a year, showing each market's share, its trend and the credit we have extended to its distributors. We added the credit measure in 2025, after one distributor's payments slowed. It should have been there from the beginning.

A limit also changes behaviour inside the company in ways that are easy to miss. Our Asian sales team is now rewarded on growth across the region rather than in its largest market, and our winemakers plan their blends knowing roughly how much of each wine every market will receive. Those changes matter more than the number itself, because they make concentration everybody's concern rather than a line in a risk report.

I would not argue that 20 per cent is the right figure for every exporter. A company selling commodity wine into many small markets might tolerate more; a producer with one dominant premium brand might need less. What matters is that the limit is chosen when the market is quiet, written down and reported to people who did not set it. The hardest time to argue for a ceiling is when the orders are on the table. The easiest is the day after a market closes, and I regret not making the argument then, when it would have cost nothing.

Trade policy will keep changing. Since the duties were lifted we have seen new import tariffs in the United States and a change in how the United Kingdom taxes stronger wine. Neither has done us serious harm, because neither market can now decide our results on its own. That, rather than any forecast of the next dispute, is the protection a board can actually buy.