Treasury Wine to retain ‘meaningful presence’ in China

CEO of Treasury Wine Estates (TWE) Tim Ford has said the company will retain a “meaningful presence” in China as operating profit in the region fell by 36.6% in the six months to 31 December 2020.

Speaking during the results briefing for TWE’s half-year fiscal 2021 results, Ford said that despite the reallocation of ranges away from China due to the new tariffs, TWE would not be abandoning the market.

He said TWE intends to retain its presence in China to promote its non-Australia country of origin portfolio, to maintain customer relationships and also “to preserve and protect the presence of the Penfolds brand within the China market”.

His words come after a number of imitation Penfolds wines were spotted on shop shelves in China last week.

TWE group net sales declined 8.2% to AU$1.41 billion in the first half of FY21, which chief financial officer Matt Young said was due to disruption to key sales channels for luxury wine and disruption to TWE’s China business due to the MOFCOM investigations. Operating profit in China fell by 36.6% to AU$78.8 million.

However, Young said this was being offset by “strong performance” in retail and e-commerce channels in the Americas, Australia, New Zealand and EMEA regions.

Demerger claims and US business

Ford said there had been much “focus and speculation” around plans for a potential demerger. In the briefing, he announced plans for Treasury’s new “global divisional model” which would be operational from fiscal 2022.

Under the new model, TWE will change from a sales-region-led business model to one that is brand-led, operating under three new portfolio divisions: Penfolds, Treasury Premium Brands, and Treasury Americas. These will be supported by Treasury Business Solutions, Treasury Supply Operations and a “stream-lined and smaller” corporate centre.

Ford also outlined a three-stage strategy for the US market, which includes divesting certain brands. He said this would be completed by the first half of fiscal 2022.

“We are progressing with the planned exit of a significant portion of the commercial brand portfolio in the US, and further we are announcing today that we will be exploring additional opportunities for brand asset and lease portfolio rationalisation as we continue to prioritise the growth of our focused premium brand portfolio to drive future performance in that region,” Ford said.

The news follows the launch of four California wines under the Penfolds label this week, with fruit grown in Paso Robles, Napa and Sonoma.