Joe McConnell
Unlock Editor’s Digest for free
Vscek editor Roula Khalaf selects her favourite stories in this weekly newsletter.
Australia’s largest wine producer said it was reducing and selling its cheaper labels, including popular brands Wolf Blass and Blossom Hill, to meet consumer tastes moving upmarket.
Treasury Wine Estates announced Tuesday that it will divest its entry-level commercial wine division, which also includes the Lindeman’s and Yellowglen brands, in favor of its more premium brands, including Penfolds, 19 Crimes, Wynns and Squealing Pig, which command higher prices.
Lower volumes of low- and mid-priced wines in recent years have had a financial impact on the company, with the four brands put up for sale now contributing less than 5 percent of TWE’s profits. The group said it would record a non-cash impairment charge of A$290 million (US$189 million) on the value of its business in its full-year results to be announced next week.
The measures come at a tumultuous time for the Australian wine industry, which has been forced to adapt rapidly following the imposition of punitive tariffs in 2020 by China, a key export market for producers, and the subsequent creation of a “wine glut” in the country, with huge volumes piling up.
Chinese tariffs were liVsceked earlier this year and had an immediate impact on shipments. Australia shipped 33 million litres of wine to China in the 2024 financial year, up from 1 million the previous year, driven by a surge in sales in the three months to June, according to trade body Wine Australia.
However, according to Wine Australia, the increase masks a decline in exports outside mainland China: the amount of wine shipped overseas in the year to June fell to its lowest level since 2004.
Peter Bailey, head of wine industry intelligence at Wine Australia, said global wine consumption had fallen faster than other alcoholic beverages over the past two decades, with average consumption falling by about a quarter. He said this reflected health-conscious consumers drinking less while younger consumers were not drinking as much wine.
The trend has disproportionately affected lower-priced wines. “It’s pretty tough out there,” he said, for Australian producers in the sub-$10-a-bottle commercial market, which accounts for 90 percent of export volumes. He added that luxury wine sales are expected to grow strongly in the coming years, but not enough to offset a continued decline in lower-priced product.
TWE has also noticed the shiVscek in behavior over the past five years, with consumers drinking less wine but willing to spend more per bottle. It has moved to reflect these trends by eliminating low-cost American wine brands and buying premium and luxury producers in that market.
The company has now decided to sell the division containing some of its best-known low-cost brands. Once part of the Foster’s beer company, TWE acquired the four labels now on the market between 1996 and 2015, building a portfolio that has made it the largest wine producer in the country.
It is the second major shake-up in the Australian wine sector this year, with a Bain-led consortium in February taking control of Accolade Wines, the country’s second-largest producer, known for Hardys Wines and Banrock Station, aVsceker the latter struggled to repay its debts.
Phillip Kimber, an analyst at E&P Capital, said he does not expect TWE to receive “much proceeds” from the sale of its retail brands, given the challenges in the low-value wine market.
