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Treasury Wine Eyes Restructure, As Leadership Change Looms

April 8, 2020

In case you missed last night’s news alert, Treasury Wine Estates has unveiled a plan to potentially spin off its Penfolds business into a separate company, with the goal of unlocking the luxury brand’s potential while accelerating the premiumization of the rest of the business.

Treasury CEO Michael Clarke noted, “Penfolds accounts for approximately 10% of our volume, but well over half of our earnings, with unique resources and a differentiated execution focus compared to the remainder of our business. A potential demerger would enhance New TWE’s and Penfolds’ ability to pursue their own strategic priorities and deliver a stronger long-term growth profile.” Penfolds could be worth up to A$10 billion ($6.2b) as a separate company, according to some analysts, the Australian Financial Review reported.

According to Impact Databank, Penfolds was up 6.4% to 70,000 cases in the U.S. last year, with the company recently unveiling a number of new initiatives behind the brand, including a program to produce Penfolds wines in California, among other global regions.

As it explores a demerger of Penfolds, Treasury says it will press forward on streamlining and premiumizing the rest of the portfolio, particularly in the U.S., including “accelerated reduction of lower margin commercial tier brands” and “divestiture and/or deletion of selected brands and production assets, either individually or in combination.”

Overall, Treasury had U.S. volume of 11.6 million cases last year, according to Impact Databank. Beringer, at 4.7 million cases on a 1.8% increase, accounted for about 40% of the total. The other million-case brands in the portfolio are 19 Crimes, up 5% to 1.6 million cases, and Lindemans, down 3.4% to 1.1 million cases. Rounding out the top five, Sterling Vineyards grew 2.9% to 841,000 cases, while Matua jumped 17.1% to 615,000 cases, earning Impact “Hot Brand” honors.

Treasury’s restructuring plans come as Clarke prepares to step down July 1, to be replaced by COO Tim Ford. The company’s Americas business also recently came under new leadership, with Constellation Brands veteran Ben Dollard assuming the helm in December.

Meanwhile, addressing the business outlook amid the coronavirus crisis, Clarke said, “In the short term these are unusual and very challenging times with consumers trading down. Therefore, TWE is not in a position to provide detailed numbers or detailed timelines at this stage as it is unclear how trading will play out in the short term.” But he asserted that both Penfolds and the rest of the TWE portfolio have “significant underlying longer-term growth potential.”—Daniel Marsteller

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