Treasury to offload ‘non-priority’ brands

Treasury Wine Estates could “retire” up to 25 “non-priority” brands in order to focus on its high-end ranges, the company’s chief executive has told shareholders.

Michael Clarke, chief executive of Treasury Wine Estates

Addressing shareholders at the company’s AGM in Melbourne chief executive Michael Clarke, who took over the troubled company in February, said that of Treasury’s 80 brands, 15 have the potential to become “global umbrella brands”.

The company announced its intention to focus on “driving consumer demand” for its flagship brands which includes Penfolds, Wynns, Beringer, Wolf Blass, Lindeman’s, Etude, Chateau St Jean, Matua, Stags’ Leap and Souverain.

Clarke said: “These are brands that have the opportunity to become truly global brands. These are brands that are flexible and can be scaled to grow globally; not just in one market or channel. This will accelerate top line growth – sustainably.”

The company plans to “slipstream” a further 20 international brands “behind the global portfolio in existing and new markets and channels,” Clarke said. A further 20 “local brands” could be used “tactically”, or offered as “exclusives to our retail and distributor partners, Clarke said.

He said the remaining brands were not a priority and may be “retired” or used as “part of a transaction or agreement” with a third party.

Making clear that offloading some of the company’s brands was likely Clarke noted: “We simply can’t invest consumer marketing dollars effectively across 80 brands.”

Treasury also announced plans to grow its operations in the US and in north Asia, particularly in China, Japan and Korea. The company has already restructured its distribution model and agreements in China, Taiwan and Korea, which Clarke said would help boost growth in the rapidly expanding North Asia market.

On its motivation to strengthen its position in the US, Clarke said: “Like China, the US wine market represents a significant growth opportunity for our Company… it is in growth… and it is premiumising. I have been very public on our commitment to the region. I believe that with the right portfolio mix, TWE can grow and win in the US. I will talk more on our plans for the US shortly. Building collaborative relationships with our retail and distributor partners in all our regions is a key priority for us.”

Despite what was an “extremely eventful” fiscal year, the winemaker said its performance was on track and ahead of the previous year. Treasury Wine Estates made a loss of $101 million in 2013/14, amid senior management changes, company restructuring and the costly destruction of hundreds of thousands of cases of excess wine.

Clarke told shareholders: “I am pleased that our performance over the first half of fiscal 2015 is, to date, on plan and ahead of prior year. This is driven by changes in our Penfolds release dates but, importantly, it is also as a result of the actions we are taking to reset, fix and invest in our business in order to deliver future sustainable profit growth across all of our regions.”