Treasury Wine Estates’ reentry into the once-lucrative Chinese market has been hampered by a government-ordered crackdown on boozy banquets and renewed efforts to choke the supply of wine being sold through the grey market.
Prime Minister Anthony Albanese had predicted the resumption of Australian wine sales into China in 2024 would lead to a resurgence in sales, but Treasury’s earnings released on Monday show the country’s appetite is not what it was.
The Penfolds maker announced in December it would slash wholesaler holdings in China by 400,000 cases and in the US by half a million as it attempts to regain control over supply and pricing in both markets, where its profit and revenue are being hit hard by fewer people drinking wine.
Demand for alcohol in China suffered after the Chinese Communist Party tightened rules around ordering extravagant dishes such as shark fin soup, smoking expensive cigarettes and drinking at official receptions and functions.
The wine giant has also been restricting shipments to other Asian countries, where some customers in other markets have been found reselling wine into China, which undercuts Treasury’s control over supply and pricing.
“If you don’t really diligently stay on top of it, it creeps,” Treasury Wine’s new chief executive Sam Fischer said of the grey market.
“I saw some pricing in the market that I thought was undermining our positioning. We went back and got a bit forensic in relation to customer order patterns and specific risky customers, and decided that there was too much risk, and we pulled right back on it.”
The reduction in shipments to Asia contributed to the 10.1 per cent fall in Penfolds’ net sales revenue for the first half of the 2026 financial year.
The $4.1 billion global winemaker, once a market darling, lost almost all of its Chinese business virtually overnight after Beijing imposed steep tariffs on Australian wine in 2020 amid worsening relations with the Morrison government.
When the imposts were finally scrapped in late March 2024, Prime Minister Anthony Albanese and Trade Minister Don Farrell hailed the end of the four-year dispute as the result of Labor’s “calm and consistent” approach.
“When the impediments to trade with China were put in place, the trade was worth, in 2019, $1.1 billion every year. Now, we reckon that the resumption of trade … will see an even higher amount,” Albanese said at the time.
Treasury Wine Estates posted a steep net loss after tax of nearly $650 million, mostly attributed to the $687 million writedown in the value of its Americas division announced in December.
Earnings nosedived 66 per cent to $236 million compared to the same period last year, while net sales revenue of nearly $1.3 billion represented a decline of 16 per cent. Revenue per case fell 5.1 per cent. The company has suspended its interim dividend.
MST Marquee lead consumer analyst Craig Woolford said the suspension of the dividend was a signal of Treasury’s balance sheet position and the timeframe needed to destock across Asia and the US.
“Treasury Wines’ has a long journey to rebuild trust,” said Woolford. Key areas of concern include the impact to Penfolds’ long-term margins given the lower demand for ultra-luxury wine in China, he added.
The company’s cost-cutting program, TWE Ascent, is underway, targeting savings of $100 million a year. New chief executive Sam Fischer said the program would be a “key enabler” for a more resilient business in the long term.
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Jessica Yun is a business reporter covering retail and food for The Sydney Morning Herald and The Age.Connect via X or email.