As Tim Ford Takes Command At Treasury, Company Outlines Challenges AheadJuly 9, 2020
Tim Ford officially became chief executive of Treasury Wine Estates on July 1, taking over for Michael Clarke. Treasury’s new leader takes the helm at a time of unprecedented tumult in the market owing to the Covid-19 pandemic, global trade tensions, and other macro factors that will present challenges early in his tenure.
Early this morning, Treasury warned that EBITS for its fiscal year completed in June were down approximately 21% to A$535 million ($374m), including regional declines of approximately 14% in Asia, 37% in the Americas, 16% in Australia/New Zealand and 18% in Europe, Middle East, and Africa. Covid-19 has had “a significant impact on TWE’s trading performance across all geographies,” the company said, adding that it cannot provide earnings guidance for the current fiscal year due to continuing uncertainty in the market.
In the U.S. specifically, Treasury noted that private label activity continues to cut into its business, citing “market oversupply that has driven continued acceleration in private label growth, which was up over 50% in the $8-$15 price points over the past six months,” in IRI data. The shutdown of the on-premise—which previously accounted for 12% of volume and 25% of revenue for TWE Americas—has also taken a toll, with the company noting that its on-premise and direct-to-consumer channels are “weighted toward higher margin, luxury wine and generally have lower cost of doing business than retail channels.”
On the brighter side, Treasury said its priority brand portfolio of Stags Leap, 19 Crimes, Matua, Beringer Brothers, and Beaulieu Vineyard has grown collectively by more than 35% in U.S. retail channels since March. Overall, TWE’s retail business has seen “strong value and volume growth across all price points since March,” with sales up by more than 15%, driven by a 20% increase in the $10 and above segment. Both 19 Crimes and Matua earned Impact “Hot Brand” awards after increasing 5% to 1.6 million cases and 17% to 615,000 cases respectively last year.
Meanwhile, Treasury said it has already “commenced the potential divestiture of selected commercial wine brands and assets in the U.S.” and is continuing to explore a demerger of its Penfolds brand, originally floated earlier this year. “While it is right to remain cautious on the near-term outlook, given uncertainty remains around the timing and pace of recovery in our key markets, we remain optimistic around our return to both margin and profit growth,” Ford summed up.—Daniel MarstellerSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.
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