Treasury Sees “Challenging U.S. Market Conditions” In Fiscal First HalfJanuary 28, 2020
In a surprise move, Treasury Wine Estates has released results for its fiscal first half ended in December two weeks ahead of schedule. While the Australia-based wine giant saw net sales rise 2% to A$1.5 billion ($1b) and EBITS climb 6% to A$367 million ($248m) globally, the company said difficult conditions in the U.S.—and unexpected changes to its Americas leadership—weighed down its business in that region during the period.
“While we are very pleased with our performance across the Asia, ANZ, and EMEA regions, our first half performance in the Americas has been a setback and is disappointing given the high expectations we have for growth in this important market,” said CEO Michael Clarke.
TWE’s Americas region saw EBITS decline 26% to A$98 million ($66.1m) at constant currency in the first half, as net sales fell 4.2% to A$613 million ($414m). While TWE’s luxury and masstige ($10-$20) depletions rose 6% in the U.S., commercial depletions dropped by 10%. Clarke cited “U.S. wine market dynamics where suppliers are trying to move surplus wine across the market at lower prices, resulting in an accelerated growth of private label, which is up approximately 15% in a market that is flat to down. This is a significant market shift in a very short period.”
Clarke also noted the recent flux in TWE’s U.S. leadership as “resulting in a loss of execution momentum through the first half that will carry into the second half.” Last summer, company veteran Angus McPherson was named as TWE Americas president, but due to unforeseen personal circumstances he was unable to relocate to the U.S. as planned. In December, former Constellation executive Ben Dollard was named as McPherson’s replacement.
Among TWE’s key brands in the U.S., Impact Databank estimates Matua up 17% to 615,000 cases in calendar 2019, while IRI data shows 19 Crimes up 13% and Beringer Main & Vine down about 2% in the 52 weeks through December 29. 19 Crimes has been a powerhouse for the company the past few years, soaring past 1.6 million cases.
While TWE’s global business fared better in the first half, the U.S. challenges aforementioned led the company to downgrade its guidance for its full fiscal year to an EBITS range of 5% to 10%, down from 15%-20% previously. “While current conditions in the U.S. wine market are challenging, we are confident that we will regain momentum under the new Americas regional leadership team and return the region to growth once the market impacts subside,” Clarke said.—Daniel MarstellerSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.