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TWE’s Michael Clarke On What’s Next In The U.S.

August 18, 2017

After posting a sales increase of 10% to A$1.1 billion ($872m) in its Americas region during its fiscal year through June, Treasury Wine Estates intends to unleash a number of new initiatives in the U.S. market in the year ahead.SND managing editor Daniel Marsteller spoke with TWE chief executive Michael Clarke to get the details.

SND: Which brands are driving Treasury’s gains in the U.S.?

Clarke: The star performer is 19 Crimes. It’s growing at about 150% and has been a tremendous proposition for us in the $10-$20 range. We’re also doing well at the luxury tier with Stags’ Leap and top-end Beringer, not only in supermarkets and liquor stores but also through direct-to-consumer. In the first half of the previous fiscal year we did a lot of work fixing brands like Beaulieu, Sterling and Chateau St. Jean—rolling out new labels, new campaigns and also higher pricing. The second half was very much about rebuilding availability, getting those brands back on shelves. That will continue to be a big part of the agenda for fiscal 2018. Sterling is a brand we can grow a lot better than we have so far, and there’s also more upside for Beaulieu. Chateau St. Jean is a fantastic brand that we’ve underleveraged. To be honest, I think we took our eye off the ball there. There’s more growth to be captured on that brand. We’re very much focused on rebuilding the strength of our California portfolio, and complementing that with continued growth from 19 Crimes. Also, in the back half of this fiscal year we’ll start rebuilding the Penfolds portfolio, which we’ve never really seriously grown in North America. And we’ll be launching our new French brand, Maison de Grand Esprit.

SND: Robert Foye is set to become president of the Americas business on January 1, replacing Bob Spooner. Are you making other changes to the U.S. team?

Clarke: Bob Spooner will stay in his current role as president, Americas, until the end of this year, and then Robert Foye will take over for him. I’m spending quite a lot of time in North America working with Bob and the team, as is Robert Foye ahead of the transition. We’ve got a nice mix of the existing American team, plus some imported talent from other parts of the company around the world. Robert Foye is a great example of someone who has fixed and grown parts of the business in other geographies, and he’ll now repeat that in America with the American team. The same is true of Andrew O’Brien, who is now the head of sales for our U.S. business. He was moved to America two months ago from Singapore, where he was running our Southeast Asia business. Michelle Terry, who’s our number-two marketer in the company, was also previously based in Asia, and she’s now in America leading our marketing there. So you’ve got an experienced team that has done it before in other regions, now working with a much stronger American team. I think we can execute even better as we go forward.

SND: In your results announcement, you alluded to some changes in your approach to distribution and brand-building?

Clarke: Yes. We’re going up against strong competitors like Constellation, Gallo and others who have pretty big trade spend budgets, so we’ve had to reallocate funds to trade spend—to displays, point-of-sale, that sort of thing. Over time, as we rebuild availability of our California brands we’ll move back to more consumer pull programs as opposed to the push with retailers. I can’t wait to get to a better balance that will allow us to help engage retailers with trade spend, while also having retailers happy about our brands due to consumer pull, which can deliver higher margins. That’s what we’re looking to get back to in fiscal 2018 and beyond in America.

SND: Are you still on the hunt for potential acquisitions?

Clarke: We are. I can’t mention their names, but trust me, there are people who know we are interested in them. It can take time for people to decide whether they want to do a deal or not. It’s not always about price. Sometimes it’s about emotion, not wanting to give up something that’s dear to them, and that’s something we completely understand. We will be very patient, and we’ll continue working to broaden our portfolio by accessing more luxury and masstige fruit and brands. It’ll be fantastic if we can land one or two of the things we’re looking at.

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