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Australia’s largest wine producer has said it is writing down and selling off its cheapest labels, including well-known brands Wolf Blass and Blossom Hill, as it responds to consumer tastes moving upmarket.
Treasury Wine Estates announced on Tuesday it planned to divest its low-end commercial wines division, which also includes the Lindeman’s and Yellowglen labels, as it focuses on its more premium brands, including Penfolds, 19 Crimes, Wynns and Squealing Pig that sell at a higher price point.
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 per cent of TWE’s profit. The group said it would book a A$290mn (US$189mn) non-cash writedown on the value of its commercial business in annual results due to be announced next week.
The moves come at a tumultuous time for the Australian wine industry, which was forced to adjust rapidly after the 2020 imposition of punitive tariffs by China, a key export market for producers, and the subsequent creation of a “wine glut” in the country as huge volumes were stockpiled.
The Chinese tariffs were lifted earlier this year and had an immediate effect on shipments. Australia shipped 33mn litres of wine to China in the 2024 financial year, compared with 1mn a year earlier, due to a surge in sales in the three months to June, according to the Wine Australia trade body.
However, that rise masked a decline in exports outside mainland China, according to Wine Australia, with the amount of wine sent abroad in the year to June dropping to the lowest level since 2004.
Peter Bailey, head of wine sector intelligence at Wine Australia, said global wine consumption had dropped faster than for other alcoholic drinks in the past two decades, with average consumption down by about a quarter. He said this reflected health-conscious consumers drinking less while younger consumers were not drinking much wine.
The trend has hit lower-priced wines disproportionately. “It’s pretty tough out there,” he said, for Australian producers in the commercial sub-$10 per bottle market, which accounts for 90 per cent of export volumes. He added that luxury wine sales were forecast to grow strongly in the coming years but not enough to offset a continued decline in the lower-cost product.
TWE has also noted the change in behaviour in the past five years, with consumers drinking less wine but willing to spend more per bottle. It has moved to reflect those trends by disposing of low-cost US wine brands and buying premium and luxury producers in that market.
The company has now opted to sell the division containing some of its best-known lower-cost brands. Once part of beer company Foster’s, TWE acquired the four labels now on the block between 1996 and 2015, as it built a portfolio that made it the country’s largest wine producer.
This is the second major shake-up in Australia’s wine industry this year, with a Bain-led consortium taking control in February of Accolade Wines, the country’s second-largest producer and known for Hardys Wines and Banrock Station, after it had struggled to service its debts.
Phillip Kimber, an analyst at E&P Capital, said he did not expect TWE to receive “much in the way of proceeds” from the sale of its commercial brands given the challenges in the lower-value wine market.
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