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Penfolds maker Treasury Wine Estates has been dumped by investors over fears that the premium wine brand is losing its appeal with Chinese drinkers, after the company scrapped its full-year earnings guidance and pressed pause on a $200 million buyback.
Treasury’s shares fell to a 10-year low (down 15 per cent) on Monday after it told the market that its latest data had shown Chinese drinkers were holding back from spending on drinks during the mid-autumn festival season, which had taken a toll on its earnings forecast.
It’s the biggest drop in Treasury’s share price since the COVID pandemic and the closing price of $5.93 was the lowest point the shares have hit since September 2015. Treasury’s shares are now down over 47 per cent for the year.
Treasury Wine Estates has recorded poorer sales in China, but it isn’t the only winemaker feeling the pinch.
China is a major market for Treasury. Penfolds is a major drawcard for the company in the country, and the weaker conditions have now forced Treasury to ditch this year’s 15 per cent earnings growth target for Penfolds. The company said its premium brand will also not meet its earnings target for the next financial year.
“Several initiatives are now being implemented to mitigate the expected impacts in China in F26 (financial year 2026) including pursuing opportunities to re-allocate product to select customers in other key markets in a manner that is sustainable and minimises the risk of parallel imports back into the China market,” Treasury said in a statement.
“Given the uncertainty that remains as to the outlook, TWE is not in a position to provide revised guidance at this point in time.”
Treasury isn’t the only winemaker contending with a weaker Chinese market. Demand for wine in China has been steadily declining since peaking a decade or so ago. Analysts have pointed to an ongoing slowdown in luxury spending and a shift from larger banquets to smaller gatherings. In May, the Chinese government updated regulations to curb lavish official banquets and to remove alcohol from such events.
Meanwhile, younger Chinese consumers are moving away from drinking premium wines and are instead moving to spirits and beer.
RBC Capital Markets analyst Michael Toner wrote in a note on Monday that Treasury’s decision to walk away from its growth guidance was “not unexpected.”
He said the complete withdrawal of guidance for Penfolds showed “the high level of uncertainty caused by evolving consumption dynamics in the Chinese market”.
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The downbeat outlook from Treasury was accompanied by a pause in the $200 million buyback, announced in August. Only $30.5 million worth of shares had been bought so far.
“As is appropriate and prudent, the on-market share buy-back will be paused until there is greater clarity around trading conditions and expectations,” the company said.
Compounding the problem for the company are the headaches it faces with the distribution of its products in the US market. Treasury has been looking for a new distributor in the US after a key player, Republic National Distributing Company, in June said it would stop operations in California from September.
Treasury at the time said RNDC’s decision would not hurt the business. But on Monday, the company said that moving from RNDC to a new distributor would hurt sales by around $50 million this year.
“The net financial impact from the Californian distribution change remained uncertain. However, it could advise at that point in time that it expected an adverse impact to Treasury Americas’ F26 operating plan net sales revenue of approximately $A50m, reflecting the difference in business plans under the distribution arrangement with RNDC and that with its new Californian distributor, Breakthru Beverage Group.”
Treasury Wines will hold its annual general meeting this week. The meeting will be the last one under the tenure of chief executive and managing director Tim Ford, who will be replaced by Sam Fischer, a former boss of local beer and spirits group Lion, on October 27.
The latest doubts around Chinese demands will add to Fischer’s workload. The company is resigned to holding on to its lower-priced wine brands, Wolf Blass, Lindemans, Yellowglen and Blossom Hill, after failing to find a buyer at an acceptable price.
The wine giant in August said it was planning to sell the commercial wine brands, but lowball offers from potential buyers forced it to reconsider the sale.
Ford in February ruled out the possibility of axing the brands, saying that “maintaining commercial brands strategically is not our plan. However, we couldn’t get a financial outcome to sell those brands, so we’re responsible to make the decision to maintain them”.
Ford’s comments in February came after he had unveiled a 32.5 per cent lift in statutory net profits to $220.9 million for the first half of the 2025 financial year, driven by the removal of China’s punitive tariffs on Australian wine.
With Jessica Yun and Bloomberg
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