Excess Australian wine surges to 262 million litres as market woes inflict more pain for Treasury

Australia’s wine industry is facing a 260 million litre surplus and consumption is tipped to slow further over the next five years amid changing consumer drinking patterns.

Monday’s warning from industry body Wine Australia came the same day the nation’s biggest vintner, Treasury Wine Estates, told shareholders it would write down the value of its Americas business by $687.4m because of a forecast 11 per cent yearly decline in future cash flows.

The non-cash impairment was “in response to further moderation in US wine category trends” and as a result, the company has “applied more conservative long-term market growth assumptions, resulting in reduced long-term earnings growth rates”.

Wine consumption per capita has been in decline since 1990 as health-conscious and younger consumers are opting for ready-to-drink spirits or giving up alcohol altogether.

The latest report from Wine Australia revealed wine production exceeded sales in 2024-25, leading to a 5 per cent increase in national stock levels. It said there was a “worsening imbalance” between supply and demand.

“Currently there is an excess of around 262 million litres of wine in stock, based on the 2024–25 sales volume,” Wine Australia market insights manager Peter Bailey said.

“That is the equivalent of around 375,000 tonnes of winegrapes. To remove this excess, the next few vintages would need to be below the 1.5 million-tonne level.”

Wine Australia is predicting consumption to decrease further over the next five years.

TWE’s share price plunged to a 10-year low in October after the company announced it was scrapping its earnings guidance and pausing a share buy-back due to an uncertain outlook in China and the US.

They fell further on Monday’s blow, dropping 5 per cent in the opening few minutes before rebounding to be 2 per cent down at 11am AEDT to $5.71.

TWE is behind the famed Penfolds brand, along with 19 Crimes, Wolf Blass, Lindeman’s, Spealing Pig, Blossom Hill and Wynns labels

Trouble in its Americas business have been largely attributed to a distributor transition in California, after its incumbent provider Republic National Distribution closed operations in the state in September.

Treasury’s investors had been hoping that the removal of trade barriers imposed by the Chinese government during the COVID-19 pandemic would lead to strong sales growth in the important market.

However consumption to date has been slower than expected. It reported in October that stock depletions for Penfold in China throughout September had been lower than expected, which it blamed on a weaker mid-autumn festival season.

But TWE’s difficulties are part of a global trend that’s seeing winemakers grapple with weakening demand, partly due to changing drinking patterns among younger consumers.

The company said it would hold an investor call in mid-December following longtime beverage executive Sam Fischer’s transition into the chief executive role.