Treasury Denies Report That It’s Planning To Demerge U.S. BusinessFebruary 8, 2021
Treasury Wine Estates (TWE) has denied a report out of Australia that it’s considering splitting its business into three parts. The Australian newspaper reported Saturday that Treasury was evaluating a potential move to create three separate companies out of its current business, including a standalone U.S. operation, a premium products group, and a commercial wine business.
In response, Treasury stated, “TWE reiterates that it has formally paused work on a potential demerger of its Penfolds brand, and further that it is not currently considering a demerger of any brands/businesses within its portfolio. As also announced on 5th November 2020, TWE is assessing internal operating models to deliver long term value through a separate focus across its brand portfolios. These assessments remain ongoing and TWE has no further announcements to make at this stage.”
Along with the larger Australian wine industry, Treasury is facing a dilemma in regard to its business in China, which has imposed tariffs ranging from 107% to 212% on Australian bottled wine imports. The move has forced an abrupt change in strategy for key Australian players like Treasury. Australia’s bottled shipments to China accounted for about 40% of total Australian wine exports, or 13.4 million cases, prior to the tariffs, with the country making up about 30% of TWE’s profits. TWE has said it will reallocate shipments to other markets but will remain committed to China over the long term.
While China has presented challenges, TWE saw rapid growth for two of its key brands in the U.S. last year. Its 19 Crimes label from Australia surged 34% to approximately 2.2 million cases in 2020, according to Impact Databank, while New Zealand import Matua jumped 18% to 730,000 cases.—Daniel MarstellerSubscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.
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