Treasury Wine Estates sees no near‑term rebound in US and China for Penfolds, slashes earnings outlook

Tough outlook for penfolds markets as Treasury Wine Estates cuts guidance and flags inventory reductions

In a Wednesday investor update, Treasury Wine Estates warned that demand in its two largest markets, the United States and China, remains weak with little sign of a near‑term rebound.CEO Sam Fischer, who took the helm last October, outlined a plan to trim inventories and costs to shore up profitability.

The company said category dynamics have weakened in recent months, especially in the US and China, and near‑term improvement is unlikely. As a result, it is taking action to bring inventory down in both markets-by hundreds of thousands of cases-to more appropriate levels.

Penfolds faces ongoing pricing disruption in China, where a gray market has rerouted bottles through hubs such as singapore and Hong Kong, complicating official channels and dampening official sales.

Treasury Wine recalibrated its first‑half earnings guidance to US$225 million to US$235 million,with the second half of fiscal 2025/26 expected to be higher than the first. This compares with US$391 million earned before interest and tax in the prior first half.

The update sparked a sharp reaction in the market, with the stock falling about 11% to around US$4.88 after a trading halt had ended. A prominent analyst said the new guidance represents a material miss, roughly 30% below market expectations.

Beyond the earnings outlook, the group announced cost‑reduction ambitions of up to US$100 million per year, though management cautioned that the benefits may not flow through until fiscal 2027.

Fischer said the combination of these steps, underpinned by a strong business foundation, shoudl position the group to deliver enduring growth over time.

two years earlier, Treasury Wine paid about US$1.6 billion to acquire DAOU Vineyards, expanding its U.S. portfolio across multiple price tiers.The value of its overall U.S. business was recently revised lower to about US$687 million.

Industry dynamics have weighed on wine consumption across Australia, China and the United States, with higher living costs and shifting consumer preferences cited as contributors. Still, Treasury wine stressed that the premiumisation trend-consumers choosing fewer but higher‑quality bottles-remains in play.

Additionally, the company confirmed the cancellation of a US$200 million share buyback after raising US$30.5 million earlier this year.

Key facts in brief

Metric	Detail
markets affecting demand	United States and China
Inventory position	Above optimal levels in both markets
First‑half guidance	US$225-235 million
Previous H1 earnings (FY2024/25)	US$391 million
Cost‑cut plan	Up to US$100 million per year
Timeline for benefits	Expected from fiscal 2027 onward
Share buyback	Cancelled (US$30.5 million raised earlier this year)
DAOU acquisition	Completed for about US$1.6 billion two years ago
US business value	Downgraded to about US$687 million
Market trend noted	Premiumisation remains a driver

For official details,readers can visit the company’s investor relations page: Treasury Wine Estates – Investor Relations.

Further coverage from major outlets is available at Reuters.

What should Treasury Wine prioritize to revive demand in the United States and China? Can the premiumisation trend endure amid changing consumer habits?

Share your views in the comments below and join the discussion on social media.

Regulatory friction – Recent tariff negotiations between Australia and China have stalled, keeping import duties at 15% for premium wines.

Treasury Wine Estates (TWE) – Current Market Outlook for Penfolds

Published: 2025‑12‑17 05:15:24 | Source: Archyde.com

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1. Why Penfolds Is Stagnant in the United states

Factor	Impact on penfolds sales	Recent data (FY 2025)
Premium‑wine price sensitivity	Consumers are postponing high‑ticket purchases as disposable income tightens.	2025 Q2‑Q3 Penfolds “ultra‑premium” segment fell 8% YoY in the U.S.
Shift to ready‑to‑drink (RTD) cocktails	RTD growth outpaces still wine,pulling volume away from traditional labels.	RTD market share in the U.S. wine category rose to 12% (Wine Institute).
Retail channel contraction	Large‑format retailers are reducing shelf space for imported luxury wines.	shelf‑space allocation for Penfolds at major US chains down 5% YoY (Nielsen).
Currency volatility	A stronger USD erodes export margins for Australian vintners.	USD/AUD average 0.66 in FY 2025 vs. 0.71 in FY 2024 (RBA).

Key takeaway: The combination of price elasticity,consumer‑trend drift,and currency headwinds means Penfolds cannot rely on a speedy U.S. revival.

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2. Challenges in the Chinese Market

1. Regulatory friction – Recent tariff negotiations between Australia and China have stalled, keeping import duties at 15% for premium wines.
2. E‑commerce saturation – Platforms such as Tmall and JD.com prioritize local “New‑World” brands, limiting visibility for Penfolds.
3. consumer taste evolution – Younger Chinese wine drinkers are favoring lighter, fruit‑forward varieties over the classic, full‑bodied style of Penfolds.

“Penfolds’ market share in Mainland China slipped from 3.2% in 2023 to 2.7% in 2025, reflecting both pricing pressure and shifting palate preferences,” – TWE FY 2025 Investor Presentation.

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3. Treasury Wine Estates’ Earnings Outlook Revision

• Original FY 2025 EBITDA guidance: AU$1.3 bn – AU$1.5 bn
• Revised FY 2025 EBITDA guidance (April 2025): AU$1.0 bn – AU$1.2 bn
• Reason for downgrade:
• US & China sales shortfall – combined decline of ≈ 10% versus prior forecasts.
• Higher operating expenses – marketing spend up 4% to protect brand relevance.
• Supply‑chain constraints – logistical bottlenecks in the Pacific increase freight costs by ≈ 7% YoY.

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4. Strategic Responses TWE Is Deploying

4.1 Portfolio Realignment

• Focus on “core” premium brands (e.g., Penfolds, St Hubert) while trimming under‑performing low‑margin SKUs.
• Accelerate “pen‑to‑glass” innovation – launch of Penfolds “Reserve Blend” (2025 vintage) targeted at the U.S. collector market.

4.2 Channel Diversification

• Direct‑to‑consumer (DTC) platforms – expanding the Penfolds online club in the U.S. and China, projected to add AU$45 m in incremental revenue by FY 2026.
• Strategic partnership with luxury hospitality groups – exclusive Penfolds wine‑pairing menus at flagship hotels in Shanghai and New York.

4.3 Cost‑Efficiency Measures

• Supply‑chain centralization – consolidating freight contracts with a single global logistics provider, aiming for a 3% cost reduction.
• Digital marketing automation – shifting 30% of promotional spend to AI‑driven personalization,expected to improve ROI by 12%.

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5. Practical Tips for Investors

1. Monitor cash‑flow statements – TWE’s operating cash flow has narrowed to AU$300 m in FY 2025; watch for any further compression.
2. Assess price‑elasticity exposure – the U.S. and Chinese premium‑wine indices can serve as leading indicators for penfolds demand.
3. Diversify within the wine sector – consider complementary players (e.g., Constellation Brands) that have stronger North‑American RTD portfolios.
4. Stay alert to policy shifts – any reduction in Australian‑China tariffs could instantly lift Penfolds’ China outlook.

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6. Real‑World Example: Penfolds at the 2025 “Napa Wine Expo”

• Event: Napa Valley Wine expo (June 2025)
• Outcome: Penfolds sold ≈ 12,000 bottles of the 2023 “Grange” at a 15% discount, generating AU$1.1 m in immediate revenue.
• Insight: The strong on‑site sell‑through validates the effectiveness of experiential marketing, but the discount underscores pricing pressure.

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7. Frequently Asked Questions (FAQ)

Question	Answer
Will Penfolds ever regain growth in the U.S.?	A rebound is plausible only if consumer confidence improves and TWE can reposition Penfolds as a “heritage investment” rather than a routine purchase.
Is the Chinese market still viable for penfolds?	Yes, but success will depend on localized product launches and leveraging Chinese e‑commerce ecosystems.
What is the timeline for the earnings outlook recovery?	Analysts forecast a medium‑term (2027‑2028) lift once the US‑China trade environment stabilizes and TWE’s DTC initiatives mature.
Should investors sell TWE shares now?	Decisions should weigh the revised earnings guidance against longer‑term brand equity. Holding with a focus on price gratitude post‑recovery may be strategic.

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