Australia's drinks producers slash output after the steepest annual fall in alcohol consumption on record

A sharp drop in alcohol consumption is forcing breweries and wineries in Australia to cut production, reduce staff and, in some cases, close entirely, as the industry faces weaker demand, household budget pressure and a fast-growing market for non-alcoholic drinks.

The strain is visible from small family businesses to large, established brands. In the Hunter Valley, winery owner Nathan Heuston said trading at his business has fallen far below the level needed to cover basic costs. He told ABC News that on busy days the winery once welcomed as many as 220 visitors, but this year it has had days with no customers at all.

He said weekly revenue has fallen from about $20,000 to about $2,000. For roughly 12 weeks this year, he said, the business was operating at about one-tenth of what it needed to pay its bills. The downturn has forced changes across the operation. Production has dropped to about 20 tonnes this year, down from 60 to 70 tonnes previously, and the winery has scaled back purchases such as barrels.

The same pressures are hitting the broader market. ABC reported that Tasmanian brewer Boag closed last week, while trade data released in June showed Australian wine exports had fallen to their lowest level in 22 years. The decline has been tied in part to cost-of-living pressure, which has left many consumers with less discretionary income to spend on alcohol.

Industry data points to a deeper shift in drinking habits. According to Fitch Solutions data cited by ABC, global wine consumption has been declining for almost a decade. In Australia, total alcohol consumption fell by about 10% in the three years through 2024. Michael Doyle, a senior analyst at IBISWorld, told ABC that the fall in the 2024 financial year was the steepest on record.

Analysts and industry groups say several forces are driving the decline at once. Younger Australians are drinking less than earlier generations, inflation and higher living costs are limiting consumer spending, and non-alcoholic alternatives are taking a larger share of the drinks market.

That change in consumer behavior is now reshaping the economics of the sector. The Independent Brewers Association said more than 80 breweries have shut down since June 2023. In Hobart, seven hotel bars entered voluntary administration earlier this year. Large retailers are also seeing slower growth or outright declines. Coles said liquor sales fell 3.3% in the last financial year, while Endeavour Group, owner of BWS and Dan Murphy’s, reported retail sales growth of just 0.7%.

Australian Grape and Wine, the industry’s peak body, has described current conditions as the toughest the sector has faced in generations. Chief executive Lee McLean said growers and winemakers in several regions are under severe pressure and warned that some businesses will not survive unless they are able to change course.

He said the group has been urging the government to help businesses manage that transition, whether by restructuring, moving into other crops, or finding different uses for vineyard land. That push reflects a broader problem for the beverages business: when demand contracts in a major exporting country, the effect can spread well beyond individual wineries and breweries, changing supply patterns, employment and investment, and increasing pressure to diversify both products and sales markets.

While traditional beer and wine producers struggle, non-alcoholic drinks makers are expanding. ABC reported that non-alcoholic beer sales in Australia are projected to nearly double to about 300 million liters by 2028, up from 150 million liters. According to ANZ figures cited in the report, non-alcoholic beer was the fastest-growing beverage segment within the alcohol industry, accounting for 45% of total non-alcoholic beverage sales in Australia in 2023 and about 10% of all beer sales.

Andy Miller, co-founder and chief executive of non-alcoholic beer company Heaps Normal, told ABC his company’s sales have been growing by about 20% a year. He said the business is now distributing non-alcoholic beer on tap, a sign that consumption habits are changing not only in stores but also in bars and restaurants. In some venues, he said, the company’s draft product is outselling alcoholic alternatives.

That shift suggests the pressure on conventional producers may not be temporary. Even where consumers continue to drink, many are drinking less often, buying cheaper products, or alternating alcoholic beverages with low- and no-alcohol options. For wineries and brewers built around higher volumes, cellar door traffic or premium positioning, that can quickly weaken cash flow.

The wine sector is also looking abroad for relief. McLean said producers are trying to win back market share in established export destinations such as the United States and the United Kingdom, while also pursuing opportunities in India and Southeast Asia. The effort to broaden export exposure has become more urgent as domestic sales soften and some regional producers confront the possibility that their existing business model is no longer viable.

Alcohol Beverages Australia, another industry body, said companies are already responding to new preferences by broadening their product ranges and investing in lower-alcohol and alcohol-free offerings. For parts of the drinks industry, that may offer a path forward. But businesses with limited scale, heavy debt or a narrow customer base may find it harder to adapt.

Doyle of IBISWorld said he expects the pressure to continue as long as inflation remains high and consumers remain cautious. People do not have the same money to spend on alcohol that they once did, he said, and he expects a continued slow decline in per-capita consumption.

The Australian government said it recognizes the challenges facing the sector. In a statement to ABC, Agriculture, Fisheries and Forestry Minister Julie Collins said the government has provided more than A$105 million in support for the grape and wine industry. That includes the Wine Equalisation Tax rebate and a new mandatory code of conduct governing wine-grape purchases. Collins said the government would continue working with the industry on future opportunities.