The Australian wine industry, once a symbol of global success, is now grappling with severe challenges that threaten its stability and future growth. The difficulties faced by winemakers today are reminiscent of the hardships of the 1980s when some, like the Calabria family, had to halt their core wine production to stay afloat by washing bottles for reuse by larger producers. Today, the pressures are even more intense as global consumers increasingly turn away from the lower-priced “commercial” brands that once drove Australia’s rise as a wine powerhouse.
According to Andrew Calabria, head of sales at Calabria Family Wines, the industry’s condition has deteriorated significantly. “Three years ago, the industry was in its best position. Now it’s the worst it has been,” he remarked, highlighting the rapid decline. This downturn has led to a significant exit of established players from the industry. Notably, Treasury Wine Estates, Australia’s largest wine producer and the owner of well-known labels such as Wolf Blass and Blossom Hill, announced plans to sell its commercial wines division, resulting in a writedown of AUD 290 million (USD 189 million). This move follows a series of similar transactions, including Bain Capital’s acquisition of Australia’s second-largest wine producer, Accolade Wines, and its subsequent purchase of French group Pernod Ricard’s Australian wine portfolio.
The industry’s current struggles can be traced back to 2020, when China imposed punitive tariffs on Australian fine wine, effectively collapsing what had been the country’s most lucrative export market. While sales to China surged after the tariffs were lifted in March 2024, industry experts do not expect a return to the pre-tariff level of AUD 1.2 billion annually. This figure was more than double the value of exports to the United States or the United Kingdom, which are Australia’s next largest wine markets.
Compounding these export challenges is a global decline in wine consumption. For instance, in the United Kingdom, per capita wine consumption peaked in 2009, with only a brief resurgence during the coronavirus pandemic. Currently, British consumers are drinking 14% less wine than they did in 2000. This trend is part of a broader global shift where major alcohol companies are moving away from the lower end of the wine market, favoring higher-margin segments such as premium wines and spirits.
In Australia, this shift is particularly impactful. The decline in demand for cheaper “big reds,” typically produced by commercial growers, has led to significant changes within the industry. Some vineyards have been uprooted to make way for more profitable crops like almonds and table grapes. Industry bodies are actively engaging with the government to support growers in transitioning their vineyards to other uses.
Consumers in Australia’s largest markets are increasingly prioritizing health and well-being, further dampening demand for lower-priced wines. As Lee McLean, CEO of the Australian Grape and Wine trade body, noted, “People are drinking less but buying a better bottle.” He described the current situation as a “crucible moment” for the industry, highlighting the global oversupply and the need for strategic adaptation.
The challenges faced by the Australian wine industry today echo those of the 1980s, with large producers focusing more on premium and luxury wines. For example, Treasury Wine Estates has shifted its attention to its successful Penfolds brand and has been acquiring high-end U.S. labels. Similarly, Pernod Ricard, despite selling off most of its wine brands, retained its Château Sainte Marguerite en Provence rosé, a move mirrored by luxury group LVMH with its investments in Château Minuty and Château Galoupet.
However, the shift towards premium wines is not without its contradictions. As Trevor Stirling, an analyst at Bernstein, observed, “The sweet spot is if you can create scale with a premium business. But that is difficult, particularly in a world where being knowledgeable and a connoisseur means you reject big brands.” This paradox underscores the complex dynamics at play within the industry.
While some welcome the move away from high-volume commercial brands, others, like the Calabria family, see value in maintaining a diverse portfolio that includes both commercial and premium wines. Andrew Calabria pointed out that sales of boxed wine—colloquially known as “goon bags” in Australia—have increased recently as consumers look for more affordable options amid a cost-of-living crisis. He argued that commercial wine still has a long-term future, emphasizing the importance of adaptability in a rapidly changing market. “We see value in all of it. The market moves very quickly,” he stated.
In conclusion, the Australian wine industry is at a critical juncture. The decisions made by producers today will shape the future of the industry, determining whether it can navigate the current challenges and emerge stronger, or whether it will continue to shrink in the face of global shifts in consumer preferences and market dynamics.
