The wineries that are growing in a shrinking market

If you run a winery in Australia, you don't need a report to tell you the market has changed. You can see it in cellar door traffic, in wine club renewals, and in the gap between what it costs to grow a tonne of grapes and what a bottle sells for. The harder question isn't whether the market is shrinking. It's what to do about it while it does.

This article looks at what's actually driving the decline, why competing on volume and price stops working once a category is genuinely shrinking, and what the wineries that are still growing are doing differently, including how they're using AI search optimisation alongside other marketing activity to be found, and chosen, by the customers who remain.

Australian wine consumption is falling at home, and the decline is generational rather than cyclical: older drinkers are moderating their consumption and younger drinkers aren't replacing them at anything like the same rate. For an individual winery, this doesn't mean growth is impossible. It means growth now depends more than ever on being found, and chosen, by a smaller, more deliberate pool of buyers. The wineries managing this well are generally doing three things: premiumising rather than discounting, building direct relationships through cellar door and wine club, and making sure they show up when those buyers search, including inside the AI tools, such as Google AI Overviews, ChatGPT, Perplexity and Gemini, that are increasingly the first stop before a purchase or a visit.

What the data actually shows

Domestic wine consumption in Australia fell 9 percent between 2020 and 2022 alone, a reduction of around 50 million litres (1). The decline is generational: IWSR analysis shows Australia's per capita wine consumption peaked in 2012 and is now 11 percent below 2000 levels, with 'monthly-or-more' wine drinking among the 18-24 cohort roughly halving between 2010 and 2023 (2). A Flinders University study found Gen Z almost 20 times more likely to abstain from alcohol altogether than Baby Boomers (3). IBISWorld values the wine production industry at $7.1 billion in 2026 across 2,234 businesses, contracting at roughly 3.4 percent a year since 2021 as oversupply and falling per capita consumption compound each other (4).

Why volume strategies stop working in a shrinking category

When a category is growing, competing on price and volume can still work because the overall pie is expanding. When a category is shrinking, the same strategy turns into a race to the bottom: discounting harder just to move the same number of bottles, while margin disappears. The wineries holding their ground are generally doing the opposite. They're narrowing their focus to a smaller number of customers who are willing to pay more, visit more often, and stay loyal, rather than chasing the broadest possible audience with the lowest possible price.

The customer who's left is more deliberate, and harder to reach the old way

As the casual, everyday wine drinker becomes rarer, the customer who remains tends to be more deliberate. They research before they buy, they ask questions before they visit, and increasingly, they start that research with an AI tool rather than a traditional search engine or a directory. That shift matters because it changes what “being visible” actually requires.

Showing up in the searches and AI answers that now shape the decision

Google's AI Overviews are already appearing on more than a third of Australian searches (5), and a growing share of all searches end without the user clicking through to a website at all, with recent estimates putting the zero-click rate at well over half of all queries (6). For a winery, this means two things at once: someone can already be making a decision about your business before they ever land on your website, and if your content isn't structured for AI tools to extract and cite, you may not be part of that decision at all.

In practice, AI search optimisation for a winery means writing direct, specific answers to the questions real visitors and buyers ask (cellar door hours, what makes your region distinctive, what a tasting experience involves, how the wine club works), using structured data such as FAQ schema so that information can be cleanly extracted, and backing every claim with checkable detail: named vineyards, specific vintages, real awards, real people, rather than general marketing language.

The activity that should sit alongside AI optimisation

Visibility gets you found. It doesn't replace the experience and the relationship that turn a search into a sale. Alongside AI search optimisation, the wineries growing inside this downturn tend to be investing in wine tourism and cellar door experience, since a memorable visit is what converts an AI-discovered visitor into a repeat customer and a wine club member. They're also building direct-to-consumer relationships through wine club and email, which insulate revenue from retail discounting and from over-reliance on volume-driven bulk sales. And they're investing in content and social media that genuinely speaks to younger or curious drinkers, rather than assuming traditional marketing will reach them. Industry commentary has repeatedly pointed to this as a gap the wine sector has been slower to close than other beverage categories (1).

The market isn't going to grow its way out of this for you, so the focus has to shift to what's actually within your control. Three things are worth prioritising. First, protect margin through premiumisation: review pricing and tiering so you're competing on quality and experience rather than discounting against everyone else chasing the same shrinking volume. Second, deepen direct relationships: invest in the cellar door experience and the wine club program that turn an occasional buyer into a repeat one, since retention matters more as the total pool of drinkers shrinks. Third, make sure you can actually be found: audit your website and content against the real questions a prospective visitor or buyer would put to an AI tool today, such as where to taste, what makes your region distinctive, and how the wine club works, then close the gaps with direct, specific, structured answers. If you'd like help working through any of these for your own brand, we're happy to have that conversation.

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FREQUENTLY ASKED QUESTIONS

Is the decline in Australian wine consumption a temporary dip or a permanent shift?

It looks structural rather than temporary. Wine Australia's own market insights data shows domestic wine consumption fell nine percent between 2020 and 2022 alone, a reduction of around 50 million litres. IWSR analysis puts Australia's per capita wine consumption 11 percent below 2000 levels, with monthly-or-more drinking among the legal-drinking-age-to-24 cohort roughly halving between 2010 and 2023. A Flinders University study found Gen Z almost 20 times more likely to abstain from alcohol entirely than Baby Boomers. That generational pattern means waiting for the market to recover isn't a strategy. Wineries that plan around a smaller, more deliberate customer base now will be in a far stronger position than those hoping the old volumes return.

If fewer people are drinking wine, why would I spend more on marketing instead of cutting costs?

Because a shrinking market makes the fight for the remaining customer more important, not less. IBISWorld values the Australian wine production industry at $7.1 billion in 2026 across 2,234 businesses, but the sector has been contracting by roughly 3.4 percent a year since 2021. In a category like that, the businesses that grow are usually taking share from competitors who are cutting marketing and discounting their way through the downturn, rather than waiting for total demand to recover. Cutting visibility spend in a shrinking, more competitive market tends to accelerate decline rather than protect margin. The wineries holding their position are generally the ones still investing in being found by, and building a relationship with, the customers who are still buying.

What does AI search optimisation actually mean for a winery?

It means structuring your website so tools like Google AI Overviews, ChatGPT, Perplexity and Gemini can find, understand and cite your business when someone asks a question your winery can answer. Practically, that includes writing direct answers to real questions (cellar door hours, tasting experiences, wine club details, what makes your region distinctive), using structured data such as FAQ schema so AI tools can extract that information cleanly, and backing claims with specific, checkable detail rather than general marketing language. For context on why this matters: Google's AI Overviews are already appearing on more than a third of Australian searches. A winery that isn't structured to be picked up inside those answers is effectively invisible at the exact moment a prospective visitor or buyer is deciding where to go.

Will AI search visibility help with younger drinkers who are turning away from wine altogether?

It helps with discovery, but it isn't the whole answer on its own. AI visibility makes sure your winery shows up when someone, of any age, is researching where to visit or what to buy. It won't by itself change someone's underlying relationship with alcohol. Industry commentary on younger drinkers has consistently pointed to a related gap: the wine sector has been slower than other categories to engage younger audiences directly on the platforms and in the format they actually use, rather than assuming traditional marketing will reach them. The two work together. Being discoverable through AI search and being genuinely engaging once someone arrives, through tasting experiences, social content and a wine club worth joining, is a stronger combination than either approach alone.

How long does it typically take to see results from this kind of shift?

There's no universal timeline, and any specific number you see quoted online should be treated with caution, since results depend heavily on your starting point, your region and how competitive your category is. What's consistent is that this is a compounding strategy rather than a one-off campaign: visibility, content and structured data build on each other over successive months rather than producing an overnight spike. The more useful question isn't “how fast” but “what's measured along the way.” A clear view of search visibility, AI citations, cellar door enquiries and wine club growth lets you see the shift happening well before it shows up in total sales.

References

1. Wine Australia market insights report, reported in Wine Companion, “Why young people are drinking less wine”, winecompanion.com.au/articles/news/young-people-and-wine

2. IWSR, “What’s driving wine’s structural decline?”, theiwsr.com/insight/whats-driving-wines-structural-decline

3. Flinders University study, reported in IBTimes Australia, “Australia Alcohol Consumption in 2026 Drops to 9.8 Litres Per Capita as Gen Z Leads Sobriety Trend”, ibtimes.com.au

4. IBISWorld, “Wine Production in Australia Industry Analysis, 2026”, ibisworld.com/australia/industry/wine-production/117

5. Digital Nomads HQ, “Google I/O 2026: The Search Updates That Matter”, digitalnomadshq.com.au/blog/google-io-2026

6. Search Engine Land, “Google zero-click searches reach 68% in early 2026: Study”, searchengineland.com/google-zero-click-searches-2026-study-479717