Australia's challenging wine industry & reporting season preview

Hi everyone, welcome to the SBS on the Money podcast for this Tuesday, the 29th of July 2025. It's a day with the Australian share market rose by 0.1%, so not that much to 8,704. We'll have the details with Kai Chen from MPC Markets in a few moments, and we'll also find out what he's telling his clients. But first, a recovery in Australia's wine exports has been driven by almost entirely by China.

Ricardo Gonçalves

After tariffs were removed in 2024, but a new round of tariffs this time from the US will likely add to a challenging time for the industry undergoing structural change. Industry group Wine Australia says total wine exports increased by 13% in value to just under $2.5 billion last financial year, but that's down on $2.8 billion back in 2018.

Ricardo Gonçalves

And while volumes also rose in the 12 months to June, they're 25% below where they were seven years ago. So to find out more, I spoke with Peter Bailey, markets insights manager at Wine Australia. Peter, firstly, how would you describe the state of Australia's wine export market?

Peter Bailey

global trading conditions are very challenging.

Peter Bailey

Well, the value of Australian wine exports increased by 13% in value to reach 2.48 billion in the 12 months end of June 2025, the increase in exports is almost entirely driven by mainland China.

Peter Bailey

After tariffs on Australian bottled wine were removed at the end of March 2024.

Ricardo Gonçalves

Tell me more about where this demand is coming from, and I guess for what kind of product.

Peter Bailey

Sure, so, obviously in the last 12 months there's been really strong growth, from China, so exports are now valued at $893 million, 85 million litres in volume, although it appears that growth has become to stabilise, post that restocking period.

Peter Bailey

But exports to all other markets, dropped by 11% in value. And that's driven by reduced supply following three small vintages and softening demand in key markets, including the US and UK. And looking at other, other destinations, after a period of decline, exports to Southeast Asia have started to grow again in the last 12 months, and volumes are higher now than they were, say, 5 years ago.

Peter Bailey

And then you look at exports to Northeast Asia, excluding China, have been relatively stable over the last two years. We were seeing growth in exports to South Korea, offsetting declines to Japan. So overall, you know, we export to 115 countries around the world, and about 3 quarters of that is red wine, 20% white wine, and the rest a combination of sparkling rose and fortified wines.

Ricardo Gonçalves

Still, as you mentioned, that demand seems to be softening. How does the sector address this, because there does seem to be a shift with wine consumption at its lowest level since 1961. And then there are those, increasing concerns about health and wellness that consumers to be more, more aware of, and there's also rising competition from other segments, right?

Peter Bailey

Absolutely. So really we need to focus on both supply and demand. So on the supply side, the sector has been adjusting the volume of wine it produces each year to better align with demand.

Peter Bailey

And then on the demand side, we're focused on defending our position in markets where we already have a pretty strong position, but then we're also diversifying into markets and segments where there are growth opportunities. So, you know, the population is getting older and the wine category globally is struggling to recruit newer generations of drinkers. So the opportunity of Australian wine is to make our wines more relevant and appealing to millennials and Gen Zs as part of their experiences and lifestyles, so,

Peter Bailey

We need to give these younger drinkers a reason to choose wine over other alcohol options, particularly as preferences continue to evolve.

Ricardo Gonçalves

What about US tariff policy? How's that likely to impact the sector now and just how concerned are you about it, because I think in the release today you also mentioned that political uncertainty, including import tariffs have also contributed to a suppressed outlook in particular for the US anyway.

Peter Bailey

Yeah, look, there are numerous factors that influence exports, so it is difficult to unpack the impact of tariffs. So I won't speculate on the implications of the tariffs, other than to say it adds more uncertainty in already challenging global environment and particularly in the US market.

Ricardo Gonçalves

And finally, where is growth now for the industry in terms of the type of product and the export market and how does the wine industry, I guess, innovate then?

Peter Bailey

Yeah, so as mentioned, global wine consumption is declining, therefore, the major growth opportunity for Australian wine is to recruit new consumers to the Australian, wine category. So Australian wine is very well regarded around around the world, and importantly, there's a large cohort of people who have yet to discover Australian wine. So IWSA have reported that there are around 380 million people who drink wine regularly around the world.

Peter Bailey

But of these only 68 million drink Australian wine, so that suggests to me there's an untapped pool of over 300 million people that currently drink wine but do not drink Australian wine. So for me, there's two opportunities to consider, to recruit and convert these people who drink wine into Australian wine drinkers.

Peter Bailey

And to encourage existing Australian wine drinkers to choose Australian wine more frequently during more occasions. So, you know, you've already mentioned the mindful drinking trend and that's seen growth in the consumption of no and low alcohol wines, with sort of no low being one of the few wine categories to record solid growth in recent years. And then in line with the broader beverage trends, there has been a shift towards wines that offer consumers something lighter and more refreshing.

Peter Bailey

So while a market does remain for the big red wines that we traditionally do so well in, consumption and consumer preferences, especially among the younger demographic, are shifting with more people opting for lighter and more refreshing, wine options. So, as such, there are growing opportunities in lighter red wines such as Pinot Noir and Grenache, as well as in white wines, rose and sparkling wines. So for that younger demographic, these wine styles may better meet their needs and taste and involving drinking occasions.

Ricardo Gonçalves

That is Peter Bailey there from Wine Australia.

Ricardo Gonçalves

Now, market day on the SBS on the Money podcast. To the Australian share market now which rose, but only slightly, the S&P/ASX 200 up 0.1% of 8,704. 7 of 11 sectors ended higher. Energy the best performing sector, followed by industrials, healthcare and information technology. A few did fall though, the worst property stocks.

Ricardo Gonçalves

Followed by consumer staples. It comes ahead of a US Federal Reserve decision on interest rates over the next couple of days, and tomorrow's all important consumer price index inflation numbers out of Australia, which will determine what the Reserve Bank here does with interest rates. For that and more, including a preview of the upcoming reporting season, I spoke with Kai Chen, head of investment at MPC Markets.

Ricardo Gonçalves

Kai, the ASX down today. Why and which sectors are driving the moves?

Kai Chen

So we saw a little bit of a drop today, about 0.3 of a%, and really it's basically a bit of news out of China, right, so we've had a pretty good run over the last 23 weeks. S&P 500 is at all time, pretty much at all time highs. but we are seeing a bit of news coming out of China where there's cracking down on steel production, so there's,

Kai Chen

A bit of fear in the mining sector again that there that we could see a slowdown in China. So we saw iron ore prices slip about 2.5%, and you know, some of the resources stock which have done really well over the last couple of weeks, have pulled back a little bit, and also the banks were a little bit weaker today.

Ricardo Gonçalves

US Federal Reserve begins its two-day meeting on interest rates tonight. What's the market feeling given the implication tariffs is likely to have on inflation there?

Kai Chen

Yeah, that's a very interesting question. I think the market is still, quite, worried about what the tariffs mean, and we are seeing some inflation come through in the US figures.

Kai Chen

But, so generally I think the consensus is to have it on hold for the next period. There are two Fed members who are pushing for a rate cut, to alleviate some of the concerns, in terms of a weaker economy. But generally I think people, the Fed is waiting to see how that tariff effect flows through on inflation.

Ricardo Gonçalves

Speaking of inflation, in Australia, the CPI data out tomorrow here as well, the more detailed quarterly number, how's the market positioning itself ahead of the data and the implication for interest rates?

Kai Chen

Yeah, so we saw a surprise outcome last month, in terms of the RBA decision to hold rates. The market was expecting a rate cut, but that didn't eventuate. But of course, when more economic figures came out, unemployment was quite weak, so 4.3, 0.2% better, worse than expected.

Kai Chen

So I think CPI really is a big figure tomorrow to see if there is room for the RBA to cut. So if it comes out softer, I think it's a pretty decisive, that the RBA will cut in the next meeting.

Ricardo Gonçalves

And even for, us journalists and, for you guys involved in the markets, we're about to approach a very, very busy time in terms of reporting season, right? So can we spend a bit of time talking about this? We're part of the way through the US reporting season, I think it's 2nd quarter reporting season. Are you seeing any trends so far with the US? And what's that likely to mean for Australia?

Ricardo Gonçalves

Reporting season when it really ramps up next month.

Kai Chen

Yeah, no, absolutely. Well, there's usually a mixed bag. I think in terms of generally, the US companies have done fairly well. So out of the tech sectors, most of the reportings were fairly good, except of course Tesla. So Tesla, when they reported it was much weaker than what the analysts were expecting, so that's why we saw,

Kai Chen

The, the Tesla share prices dropped, over that earnings period, but, you know, it's recovered quite quickly, back to where it was a couple of days ago. So, in general, you know, the banks reported very strong. A lot of the financial services companies in the US have reported exceptionally strong.

Kai Chen

On the Australian front, you know, we are seeing, a couple of companies, coming up, Lyontown, and, and Sandfire, a lot of the resource companies, it would be interesting to see because we did actually see a bit of a recovery coming back, over the last two weeks, with weakening tariff, threats to China, so that is a positive and as well as Albanese's visit to China, potentially being positive for the Australian resource sector.

Kai Chen

However, Boss Energy and Viva were actually, to surprise, pre-release, so Boss Energy sold off about 45% yesterday, and that was on announcement, basically that, the Honeywell, site was much underperforming.

Kai Chen

Where, you know, the resources were a bit lower grade than they expected. So, yeah, we saw a bit of a hit, and then I think Viva today, you know, again, a pretty bad report. So, a bit mixed leading up to the earnings, but you, you know, we shall see.

Ricardo Gonçalves

So finally, what are you telling your clients then at the moment and where are the opportunities for

Kai Chen

investors? Yeah, I think it's a bit of a mixed bag because we are seeing all the indices at pretty much the highs.

Kai Chen

It, but it's very difficult because on the horizon there's a lot of turmoil and instability, so you know, again with the tariffs that Trump's holding out for, as well as, you know, potential for rate cuts. So it's quite undecided. I think for our clients we're saying, you know, just hold, hold a balanced approach, have a bit of money on, have a bit of cash on the sidelines and you know, there will be good opportunities because volatility will come back.

Kai Chen

We do see a bit of opportunity in the energy sector, so Woodside is pretty undervalued, and we've been seeing a bit of recovery, so a very positive trend. And our long-term favourite gold, which has done spectacularly well over the last year, Precious Metals, gold and silver's done really well. And, for the, for the people who are into a bit more, risky assets, cryptocurrencies have, you know, gone fairly well as well, so Bitcoin's at about $118,000.

Kai Chen

Those are all opportunities that we are looking at.

Ricardo Gonçalves

It's Kai Chen there from MPC Markets. Tomorrow the focus will be on those inflation numbers, the quarterly numbers from the ABS. We'll have the details then. Don't forget in the meantime, if you do like a podcast, give it a rating or a review on Apple Podcasts and Spotify and to click subscribe. See you tomorrow.

Speaker 1

This SBS on the Money podcast is provided for informational purposes only. The content on this podcast should not be understood as constituting advice or a recommendation. It is not personal advice and does not consider your personal circumstances or objectives. You should contact a licensed professional before making any financial decision.

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