Australian wine export data for the September 2024 quarter shows another quarter of rebuild in China. China bottled wine volumes were 1.2 million cases.  The rest of world saw volumes down slightly, reflecting this reallocation.  Consistent with broader demand trends and Treasury’s strategy, the export data highlights that wines over $20 per bottle are performing well, while other price segments are softer. We expect Treasury to have a solid FY25e year given higher prices for its luxury wine.

Australian wine exports have rebounded in the June 2024 quarter, largely given the sell-in of wines to Chinese retailers and distributors. Total exports were up 81% year-on-year. While it is good news, we will need more time to judge the rebound in Chinese consumer demand for Australian wine. Nevertheless, it does suggest concerns about excess supply already in China may be overdone.

Treasury Wines reported a mixed 1H23 result. Underlying sales were weak, but profit margins improved significantly. The Franks Family acquisition contributed almost two-thirds to its EBITS growth. The company needs to lift its marketing and promotional investment in 19 Crimes to stabilise revenue. Gross margin improvement was significant in 1H23 and reflects the acquisition as well as reduced supply chain costs. We expect COGS improvements to be more meaningful in FY24e as grape costs fall.