How sober curious and Ozempic gave Aussie wines a Christmas hangover |
Shares of Penfolds owner Treasury Wine Estate (TWE) are trading at a decade low, and its plight serves as a good barometer for Australia’s wine industry, which is being hit with waning demand and oversupply.
TWE shares have more than halved since last year, and it is not hard to see why.
Chief executive Sam Fischer revealed this month that sales channels in China and the US – its two biggest markets, and two of Australia’s biggest wine export markets – were clogged with hundreds of millions of dollars’ worth of unsold wine.
The re-opening of China to the Australian wine market has left Treasury Wine Estates with unsold stock.
It will take two years to clear the excess and match supply with reduced demand. This sobering fact forced TWE to slash sales and earnings forecasts, and analysts do not see this as a one-off hit for investors.
“We now think earnings in the US and China have rebased permanently lower,” Morningstar’s Angus Hewitt said after the update.
It might have been totally coincidental that just before TWE’s update, Wine Australia issued a report on Australia’s growing wine surplus, with production exceeding sales by around 33 billion litres for the year. The outlook is no better.
“Consumption is forecast to decrease further in the next five years,” the report said.
China lifting punitive tariffs on Australian wines last year was only going to do so much to boost the industry’s health when the global wine........