Australian Vintage’s declining sales, high inventory put a damper on MadFish takeover

A higher inventory balance driven by lacklustre sales and an oversupply of wine for its Poco Vino and Lemcesso brands has left Australian Vintage (ASX: AVG) readjusting its cash flow expectations for FY25, with the company now forecasting a $13 million hit instead of breaking even as initially planned.

While the result is a $15 million year-on-year improvement on a like-for-like basis, the company told shareholders that it is “disappointing” and has forced them to double down on its sales growth and inventory management efforts for FY26.

Australian Vintage expects a three per cent drop in sales for FY25, with its flagship McGuigan and Tempus Two brands likely to mirror the soft market amid a lack of major new product innovations.

After releasing the results, shares in AVG fell as low as 12 per cent today, hitting 75 cents per share.

Despite the challenges, AVG is optimistic that FY26 will see mid-single-digit sales growth.

“AVG estimates fiscal 2026 will be a transformational year for the group, both in terms of turning declining sales into growth and generating free cash flow,” the company said in an update to shareholders.

“However, the basis for our confidence in FY26 is partly due to the difficult decisions we have made in the current year, where it was necessary to set the platform for future growth and cash flow generation.”

In its update, AVG also noted it dedicated significant time and capital towards the launch of its small 187ml Poco Vino bottle, which hit the shelves in July 2025 in the UK and six months ago in Australia. The company said pre-sales have “already exceeded our expectations” to the extent that the group has brought forward further investment in packaging as it continues to build inventory.

In the second half of FY25, the company identified an $8 million net sales contribution estimate for Poco Vino, which has now been upgraded to $10 million in net sales for FY26 through increased demand worldwide. Poco Vino currently has more than 4,000 distribution points confirmed for launch with interest across Asia, Europe and through a partnership in the US.

Meanwhile, the group’s Lemsecco brand requires working capital to secure long-term citrus and Prosecco bases to supply FY26 demand, which AVG estimates will exceed the FY25 result by an additional 80,000 cases.

The range, which uses Australian-grown citrus and Prosecco, is expanding across Australia, New Zealand, Canada, the US and the UK. It is anticipated to bring in more than $5 million in FY26 net sales.

AVG anticipates ending the year with a net debt of $76 million.

Based in Adelaide, Australian Vintage is now led by Tom Dusseldorp, who was appointed CEO a month ago following the departure of Craig Garvin - a former executive who returned to AVGafter being sacked by the board in May 2024 for conduct that “displayed a lack of judgement.”

Australian Vintage acquires MadFish Wines

The update to shareholders came at the same time AVG announced it will acquire MadFish Wines for an undisclosed amount from the WA-based Burch family, which also owns brands Howard Park and Marchand & Burch.

While MadFish represents a small portion of Australian Vintage’s overall portfolio, it plays a strategic role in the UK market by adding scale, around 200,000 cases, and balancing the predominantly red wine-focused McGuigan brand.

The lighter variety from MadFish also strengthens the company’s premium WA offering in its international sales mix.

Under the agreement, AVG has also secured distribution rights for Howard Park in the UK, Ireland, Europe and Canada. Howard Park Wines operates across four regions in Western Australia; Perth, Margaret River, Pemberton and the Great Southern.

“AVG has entered a contract subject to conditions precedent to acquire the international ownership of the Madfish brand, outside of Australia, a dynamic Australian wine brand in the UK,” the company said in an update to shareholders.

“The Madfish brand is anticipated to be earnings enhancing from year one.”