Treasury Wine Sees Growth In Penfolds, Struggles At Lower End Ongoing

Offering an update on its business last night, Treasury Wine Estates said the divergence of fortunes at the upper and lower ends of the wine market are ongoing, with luxury brands like Penfolds prospering as the entry level continues to struggle. Treasury is now considering shedding further assets as it looks to position its portfolio for growth moving forward.

Overall, Treasury is now expecting a 2%-3% decline in net sales revenue for its fiscal year ending in June, with growth in Penfolds partially offsetting declines in its Treasury Americas and Treasury Premium Brands units. EBITS is still projected to rise, gaining 11% to 13% to A$580 million to A$590 million ($378m to $385m).

The company noted that “category consumption trends for entry-level premium wine in the United States remain challenging and have shown signs of further deterioration in recent months. Specifically, the 19 Crimes portfolio has continued to perform below expectations.” According to Impact Databank, 19 Crimes slipped 7.2% to 2.2 million cases in the U.S. last year, but remained the fourth-largest imported table wine brand in the market. Treasury’s second-largest label in the U.S., Matua from New Zealand, fared better, increasing 9% to 830,000 cases.

Other TWE brands on the rise in the U.S. include Beringer Brothers (+3.4% to 133,000 cases, St. Huberts (+32% to 84,000 cases), Beringer Knights Valley (+5% to 80,000 cases), BV (+18% to 80,000 cases), and Woodwork (+47% to 64,000 cases), offset by double-digit declines in bigger labels like Lindemans and Sterling Vintners Collection. Penfolds was down slightly to just under 70,000 cases in the U.S. but continues to drive value gains globally.

More broadly, Treasury said “the ongoing inflationary environment, particularly for packaging materials, is expected to place upward pressure on TWE’s cost of goods in F24,” noting that the situation is placing further stress on its commercial business and necessitating more moves to premiumize and streamline the portfolio.

“We continually and proactively assess our business performance, our structure and our cost base to make sure we’re in the best position to continue to deliver on our premiumization and growth strategy,” said Treasury CEO Tim Ford. “With changing consumer preferences and a tightening economic environment in most major markets, we’re taking the opportunity to make changes in our business now, so we have increased flexibility in the future to continue to grow our premium and luxury portfolios.”—Daniel Marsteller

Tagged : 19 Crimes, Beringer, BV, Lindemans, St. Huberts, Sterling Vintners Collection, Treasury Wine Estates, Woodwork

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