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Treasury Americas MD Stephen Brauer On What’s Working, What’s Not In U.S.

August 23, 2011

Following up on Treasury Wine Estates’ full-year results, released yesterday, Shanken News Daily caught up with Treasury Americas managing director Stephen Brauer to get a closer look at what’s driving Treasury’s U.S. performance so far in 2011. While volume fell 12.3% for Treasury’s U.S. business over the past 12 months—and net sales were off 6% at constant currency for Treasury Americas—Brauer noted that, stripping out foreign exchange, earnings for the region came in up 8.2%, and net sales per case increased as a result of a strong performance at the high end.

“The luxury business in the Americas (including Stags’ Leap, Beringer Luxury and Etude) grew a little over 7% in fiscal 2011 and actually gained momentum over the second half of the year,” he says. “Then there’s the emerging and innovation component, which was up 6%. The stars there were Colores del Sol from Argentina, which is obviously a hot country of origin, and one we’re making gains in; Cellar No. 8 which competes in that $8-$10 sweet spot; Souverain at the $10-$20 price point; and our two new brands Santa Barbara Wine Collection and Sledgehammer, which target the sophisticated female consumer and millennial males respectively.”

The third area of the Treasury Americas business that has made a charge in recent months is what it calls the Beringer Light & Refreshing wines—excluding Blush—which grew double-digits. These include Beringer’s light, easy-to-drink, chillable wines, such as Moscato. “We got into the Moscato phenomenon a little bit late, but we’re making up for lost time,” says Brauer. “In addition to really driving the Beringer White Moscato at the end of the fiscal, we were first to market with a Red Moscato, which has received a very good response from the trade and is starting to get out to the consumer,” he says.

Turning to the challenges still ahead for Treasury, Brauer said there was clear room for improvement for the group’s value brands and Australian portfolio, which together accounted for a sizeable chunk of its U.S. volume decrease. “Part of the decline among those brands was category driven and part of it was due to tighter control of trade spend. Looking ahead we plan to stabilize our value brands with more tactical spend to drive better execution at the point of sale, the moment of truth. And we’ll redirect and reinvest behind our Foundation brands, led by Beringer, again at the point of sale, whether it be in front of the wine list at a restaurant or in front of the shelf at a retailer.”

Treasury recently completed the first phase of a distributor realignment in the U.S., a revamp that covered 50% of its U.S. business, with the second phase expected to commence in the next few months. The company is also now planning a restructuring effort across its global business. “As David Dearie (Treasury Wine Estates CEO) has said, we’ll have more of a global focus on the business looking ahead. As such we’ll be restructuring into global brand business units,” Brauer says. “Final decisions on the restructure haven’t been made yet, so work is being done to finalize both the design and incumbents of that structure.”

As it seeks to realign its business in both the U.S. and abroad, Treasury remains a potentially very attractive takeover target following its May demerger from Foster’s Group. Analysts from Deutsche Bank, Bank of America, PNC Capital Advisors and others all believe the company is currently undervalued, and that the strong Aussie dollar that’s held down its exports of late will depreciate in the coming years, relieving a significant barrier to progress in the U.S. and other international markets.

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