Can Australian Vintage’s Innovation Drive Transformational Growth in FY26?

FY25 Performance – Navigating Headwinds

Australian Vintage Limited (ASX – AVG) closed its 2025 financial year with a modest 1% decline in sales to $257 million. While this slight dip reflects ongoing softness in the global wine market, the company managed to improve earnings and cash flow through rigorous cost control measures. Earnings before interest, tax, depreciation, amortisation, and impairment (EBITDAS) rose to $15 million, with EBIT at $1 million, and a net loss after tax narrowing to $6 million. These results, however, fell short of the company’s internal targets.

A notable drag on FY25 earnings was a one-off $6 million expense related to the UK’s new Extended Producer Responsibility (EPR) waste management legislation. Australian Vintage anticipates these costs will be integrated into future product pricing, mitigating ongoing impacts.

FY26 Outlook – Innovation and Expansion Drive Optimism

Looking ahead, Australian Vintage is positioning FY26 as a transformational year. The company targets a 5-8% increase in topline revenue, aiming to reverse years of sales decline and pivot towards positive free cash flow. Early signs are promising, with July sales ahead of budget and strong consumer adoption of new brands Poco Vino and Lemsecco, particularly in the UK market.

Poco Vino’s forecasted sales have been upgraded to $15 million, reflecting early UK sales exceeding initial estimates by fourfold. The brand’s growth potential extends beyond Australia and the UK, with planned expansion into New Zealand, Southeast Asia, China, Europe, the USA, and the Middle East. The company also plans to broaden Poco Vino’s product range and leverage a “make where sold” manufacturing model across hubs in Amsterdam, Napa Valley, and Merbein to improve margins and speed to market.

Lemsecco, the company’s spritz innovation, is also set for significant growth, with FY26 sales expected to surpass FY25 by over 100,000 cases, translating to an incremental $4 million in net sales. The brand has secured long-term supply agreements and FDA approval for US shipments, supporting its international expansion.

Strategic Acquisitions and Core Brand Stability

In addition to innovation, Australian Vintage is bolstering its portfolio through strategic acquisitions. The company acquired international rights to the MadFish brand outside Australia and secured distribution rights for the Howard Park wine brand across key markets including the UK, Europe, Canada, and Ireland. While these additions currently contribute modest revenue, they offer scalable growth potential and premium positioning.

Meanwhile, the core brand portfolio remains a cornerstone of the business. Despite a soft market, Australian Vintage has maintained and even grown market share in key geographies. Pillar brands now represent 78% of total revenue, up from 65% in FY20, with notable growth in Tempus Two, Nepenthe, Barossa Valley Wine Company, and zero-alcohol wines. The company expects renewed growth in McGuigan and Not Guilty zero-alcohol wines, supported by expanded distribution in North America and sponsorships such as Cricket Australia’s Ashes series.

Operational Efficiency and Leadership Renewal

Operationally, Australian Vintage is reducing fixed grape supply commitments by exiting leases and contracts at Millewa and Balranald, aiming to cut excess red grape sourcing and improve cash flow. Inventory increased to $220 million in FY25 due to contracted wine intake but is expected to decline significantly by FY27, supporting medium-term free cash flow generation.

Leadership changes underpin the company’s strategic shift. The board was refreshed in August 2024 with new directors, and Tom Dusseldorp was appointed CEO in May 2025. The new leadership is focused on driving topline growth, margin accretive innovation, and free cash flow generation, targeting cash flow neutrality by FY26 and positive cash flow thereafter.