Chinese drinkers celebrate the return of Penfolds after tariffs removed

Australia’s luxury wine brand Penfolds has ‘real energy’ after re-entering the Chinese market following the end of crippling tariffs, the Treasury Wine Estates boss says.

Treasury Wine Estates chief executive Tim Ford. Picture: Aaron Francis

Chinese drinkers have welcomed back Penfolds with open arms after the removal of tariffs, with the luxury wine brand’s Bin 389 and Bin 407 proving particularly popular and sales holding up through the recent mid-autumn festival, the Treasury Wine Estates boss says.

Speaking to The Australian after the winemaker’s annual general meeting where it avoided a second strike against its remuneration report, Treasury Wine chief executive Tim Ford said the Chinese market was proving buoyant despite talk of a slowing economy.

“We have seen the mid-autumn festival demand for Penfolds in particular really what we expected it to do, which is really positive and a proof point on how the brand has been received back in the market,” Mr Ford said on Thursday.

“So first quarter in (since tariffs ended) is so far so good, and I think the policy news and the consistent flow of that information and talking to our customers they see that as only positive as sentiment should improve.”

Treasury Wine and other Australian winemakers were able to sell profitably back in the Chinese market from March after 200 per cent-plus tariffs were removed as part of improving political and diplomatic relations between Canberra and Beijing.

Mr Ford said his company’s wines, led by Penfolds, had quickly re-established themselves in China and were being warmly welcomed back by loyal fans.

“Very welcoming. Having spent a number of trips up there during that period of time, customers are excited. It is great to have the brand back in the market, building distribution again and they have got a real energy behind what was a very successful brand for a lot of these local Chinese businesses.”

Luxury wines such as Penfolds are doing well amid a generally flat market and difficult trading for wines that sell for under $15 a bottle. Picture: Naomi Jellicoe

In his AGM address on Thursday, Mr Ford confirmed earnings guidance for fiscal 2025 with Treasury Wine continuing to expect full-year earnings in the range of $780m to 810m, with sales growth to be driven by continued strong momentum across its luxury brand portfolio such as Penfolds.

Shareholders were also told the company’s luxury-led focus was driving top-line performance, with double-digit organic sales growth delivered in the first quarter. Penfolds’ momentum remained strong, led by Asia and Australia, and in China the brand’s performance was in line with expectations.

Treasury Wine continued to expect low double-digit earnings growth for Penfolds in 2025, while in the US after realigning distributor arrangements Treasury Americas luxury portfolio performance was expected to accelerate from the second quarter for the key holiday selling period, Mr Ford said.

Treasury Wine and Mr Ford are betting big on the US, and in 2024 paid $US900m for DAOU Vineyards to give it entry into premium and luxury wines.

“The acquisition has established Treasury Americas as the leading luxury wine business in the United States, the largest market for luxury wine globally, and we are energised by the opportunity to create another outstanding luxury wine platform within Treasury Wine, alongside Penfolds,” Mr Ford told shareholders.

In the US Treasury Wine made some alterations to its distribution model, which seems to have impacted sales data as collected by Nielsen, but this looks to have been a blip as sales momentum picked up.

Citi analyst Sam Teeger said the market should take positives from the confirmation of earnings guidance for 2025.

“We think the reiteration of 2025 earnings guidance … is likely to be taken positively given Treasury provided an explanation of weaker DAOU Nielsen data over the first quarter (being distributor changes) and said it expects Americas luxury performance to accelerate from the second quarter, the portfolio (ex Penfolds and ex Americas Luxury) is seeing net sales revenue in line with the previous corresponding period which is better than Neilsen data has suggested, and despite macro challenges, China performance remains in-line with expectations.”

Turning to Australia, Mr Ford said after the AGM that the broad wine category was flat but higher priced wines were doing well.

“We are still seeing pockets of higher priced wines doing well, it is still a challenging category below $15 a bottle. But innovation is really driving the wine category in Australia right now.”

He said an example of this innovation was new products such as its recent launch of a range of spritz wines under its Squealing Pig brand.

While Treasury Wine dodged a second strike against its remuneration report at the AGM, its chairman John Mullen earned a 15.8 per cent vote against his re-election as a director. There were some concerns among institutional shareholders due to his workload that includes being chairman of Qantas and Brambles.

Last year the winemaker was slapped with a first strike as 46 per cent voted against the non binding resolution at the 2023 AGM. But at Thursday’s AGM more than 98 per cent voted in favour.

Originally published as Chinese drinkers celebrate the return of Penfolds after tariffs removed