TWE Cuts Penfolds Growth Outlook as China Market Weakens

Australian wine giant Treasury Wine Estates (TWE) has cut its earnings forecast for its flagship brand Penfolds for the first time this year, citing a slowdown in China as the biggest drag on growth. The company said it will redirect part of its Penfolds portfolio to other markets after soft demand — a warning that sent its shares tumbling 14% on Monday.

In a statement released October 13, TWE said Penfolds’ shipments for the first quarter of fiscal year 2026 (ended September) were broadly in line with expectations, but consumer sales in China had weakened sharply since June. While sales ticked up slightly in August, performance during the Mid-Autumn Festival remained below expectations.

TWE had previously cautioned that China’s demand for alcohol has been hit by the government’s May 2025 directive restricting official alcohol consumption, which sharply reduced banquet and business-related drinking — once major sales drivers for premium wine and baijiu.

Preliminary data showed that although September sales were marginally higher year on year, they still fell short of the company’s internal targets. “If the performance trends indicated by the preliminary data continue through F26, Penfolds depletions targets for F26 in China are unlikely to be achieved,” TWE said. The company added that its earlier guidance of low- to mid-double-digit EBITS growth for FY2026 and around 15% for FY2027 was no longer realistic. 

To cushion the impact, TWE said it is taking measures including reallocating inventory to other key markets and reducing the risk of parallel imports flowing back into China. The company stressed it would maintain price discipline to preserve the long-term value of the Penfolds brand.

This is the second time this year TWE has voiced concern about its China business. In its FY2025 results released in August, the company noted that Chinese consumers were moving away from large banquets toward smaller business gatherings and lifestyle-oriented drinking occasions, slowing inventory clearance. The same report said the alcohol restrictions introduced in May further dampened consumption in public and corporate settings.

Structural Shifts in China’s Wine Market

TWE’s latest downgrade highlights the structural challenges facing China’s wine sector. For years, wine has been positioned as an affordable luxury in China, largely consumed in business banquets and gifting scenarios. Penfolds — among the most recognised imported wine brands in the country — has long benefited from these traditions, with its Bin 389, Bin 407, and Bin 707 labels dominating festive and corporate sales.

Since the pandemic, however, China’s economic recovery has faltered, business entertaining has declined, and traditional wine-drinking occasions have fallen sharply. The government’s alcohol restrictions in May further curtailed public-sector spending, intensifying pressure on the market. Meanwhile, wine’s allure has been eroded by the rising dominance of baijiu, which carries stronger brand power and symbolic value among Chinese consumers.

U.S. Operations Also Facing Adjustments

Outside China, TWE’s Americas division is also undergoing transition. The company said Treasury Americas performed well outside California, with sales growth exceeding the luxury wine category average by more than 5%, led by strong performances from DAOU, Frank Family Vineyards, and Stags’ Leap.

In California, however, sales were temporarily constrained by distributor changes and account restructuring with key clients in September, creating short-term pressure on performance.

Given the uncertainty in both the Penfolds and Americas divisions, TWE said it will withdraw its group-level EBITS growth guidance.

Shares Dip

Following the announcement, TWE shares plunged, extending a months-long decline. The stock, which closed at A$6.98 last Friday, dropped to A$5.99 in early Monday trading — down 14.2% — before rebounding slightly to A$6.23, still 10.7% lower for the day.

Analysts said the downgrade underscores how the traditional drivers of high-end wine sales in China have weakened. As social and policy environments evolve, the banquet-driven consumption model that once fuelled imported wine brands like Penfolds is rapidly eroding.

How producers reposition themselves amid this reset, they said, will determine future growth. For Treasury Wine Estates, China’s slowdown represents not only a short-term setback, but also a signal that the country’s premium wine era may be entering a longer period of adjustment.