Penfolds Maker Warns of China Sales Slowdown as Demand Weakens
Udumbara
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While 2025 proved to be a strong year for wine exports to China, one of Australia’s largest winemakers is predicting figures for 2026 will be significantly below expectations due to weakening consumer demand.
Treasury Wine Estates (TWE) owns some of the industry’s leading brands, including Penfolds and Rawsons Retreat. It recently acquired a 75 percent equity in Stone & Moon Winery in Ningxia, planning to establish a scalable base to sell locally sourced luxury wines to Chinese consumers.
But after experiencing growth in 2025, the company is now broadly pessimistic about prospects for 2026, citing the declining demand as China’s economy slows.
In 2025, net sales revenue from China increased 7 percent, and earnings before interest and taxes rose 13 percent. The company says the result was “driven by the strong growth in Bin & Icon portfolio shipments to China as part of the return of the Australian portfolio to that market.”
The results were strong enough for Treasury Wine Estates to make China its priority market for wine allocation, favouring it over the United States and other regions.
However, TWE Chairman John Mullen recently told shareholders the company began to note a “softness” in sales from August. He attributed this to “evolving consumption dynamics within the alcohol sector, which were impacting large-scale banqueting occasions.”
‘Well Below Expectations’
“Unfortunately, the early signs of improvement were not sustained, and while we do not yet have definitive numbers from the festival sales period, it is becoming clear from the preliminary data that our depletions (sales) in China for fiscal 26 are going to fall well below expectations if these trends continue,” Mullen said.“As a result, TWE no longer believes it is appropriate to retain the guidance previously provided in relation to Penfolds’ performance for fiscal 2026 and 2027.
“We will now actively pursue opportunities to re-allocate product to other markets, but will do so with caution to ensure that it doesn’t increase the risk of parallel imports into the China market.”
China’s Consumer Slowdown
Faced with declining consumer demand, Beijing has been considering a variety of ways to encourage spending, including a subsidised trade-in programme.However, retail sales grew just 3.4 percent year-on-year in August 2025, easing from 3.7 percent in the previous month and falling short of market expectations of 3.8 percent. It was the slowest pace since November 2024 and the third consecutive month of deceleration.
While China and Japan were among the world’s top 20 wine-consuming countries as recently as 2024, China posted a steep decline in consumption, dropping by 19 percent in 2025. With consumption heavily dependent on business entertaining and gifting, the contraction in corporate and government spending has significantly dampened demand.
Local producers have fared even worse. Total wine imports (excluding Australia) are now just one-third of what they were five years ago, while consumption of domestic Chinese wine has collapsed, declining by 70 percent in volume.
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