Australia’s wine glut squeezes growers

Australia’s wine industry is facing a supply problem that has been building for years and is now pressing hard on growers, wineries and regional economies. Wine Australia said the country held about 2.06 billion liters of wine in storage at the end of June 2025, after producing roughly 52 million liters more than it sold in the 2024-25 financial year. That left the industry with an estimated 262 million liters of excess wine above what would normally be considered commercially healthy at current sales levels.

The imbalance is not just a matter of full tanks. It reflects a broader shift in demand that has weakened the market for bulk wine and lower-priced reds, especially from inland regions that depend on large volumes. Wine Australia’s stock-to-sales ratio rose to about 1.9 in 2024-25, compared with a long-term average of 1.66, a sign that inventories are running well ahead of sales. The inventory level was about 5% above both the previous year and the 10-year average.

For growers, the numbers translate into pressure on grape prices and, in some cases, losses on every tonne harvested. In South Australia’s Riverland, New South Wales’ Riverina and parts of the Murray Valley, many vineyards were built around high-volume production for affordable red blends and bulk wine. Those regions were once supported by strong export demand, including shipments to China. That market has changed sharply since tariffs and political tensions disrupted trade.

Indicative prices for Shiraz in the Riverland for the 2026 vintage have been reported at about $80 to $120 a tonne, while production costs are said to be above $350 a tonne. Industry groups say that gap is forcing some growers to pull out vines rather than keep producing fruit they cannot sell at a profit. Local leaders in the Riverina estimate that about 5,000 hectares have already been removed there, with more likely to follow if prices do not improve. KPMG has suggested that as much as 20,000 hectares may eventually need to come out nationwide to bring supply back into line with demand.

The oversupply is also showing up in retail pricing. Supermarket shelves and online wine stores have been filled with discounts as wineries try to move stock that has been sitting in tanks and barrels. Some wines are being sold at or below cost. That gives consumers cheaper bottles in the short term, but it also shifts the burden onto growers and wineries that are trying to survive on thinner margins.

Demand is weakening for reasons beyond Australia. Wine consumption is falling in many mature markets, including Europe and North America, while younger drinkers are turning more often to beer, spirits and ready-to-drink products. At home, Australians are still drinking wine more than any other alcoholic beverage by share of consumption, but overall alcohol use per person has been trending down. Health concerns, cost-of-living pressures and changing habits have all played a role.

The strain is not evenly spread across the industry. Analysts say there is still strong demand for premium Australian wine, especially in export markets that value quality and distinct regional identity. The problem is concentrated in budget wine and bulk categories, where supply remains too high. That leaves inland producers carrying much of the pain while cooler regions making smaller volumes of higher-value wine face a different market altogether.

Wine Australia’s figures suggest this is not a temporary glut but a structural problem that will take time to correct. Industry bodies have called for support to help growers exit or transition out of unprofitable vineyards, rebuild export demand and provide services for communities under stress. Without a reduction in vineyard area and a better match between production and sales, they warn that grape prices are unlikely to recover soon.

For buyers, the current market offers bargains, but it also reveals how fragile parts of Australia’s wine sector have become. The bottles selling cheaply today are often tied to vineyards and regions under severe financial pressure, with little room left for another weak season or another year of excess stock.