Wine giant to put SA label back on shelf
Treasury Wine Estates will let go of brands including a famous South Australian label it has owned for decades, as it moves to focus on the premium market.
Treasury Wine Estates (TWE) today announced it would divest itself of South Australia’s Wolf Blass brand which it acquired in 1996, as well as Yellowglen, Lindeman’s, and Blossom Hill.
The company had previously flagged a focus on its premium brands, noting in 2023 that the trends and outlook for its commercial wine remained challenging, and in 2021 divesting a number of its lower-end US brands.
TWE currently participates in three price segments, being luxury ($30 and up), premium ($10 to $30), and commercial (below $10). TWE said today that its commercial portfolio represented less than five per cent of its gross profits for FY24.
“As announced at its F24 half-year results in February, TWE has been assessing the future operating model for its global portfolio of Premium Brands,” TWE said today.
“As part of this review, TWE has determined that it will seek to divest its Commercial brand portfolio.”
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As part of the ongoing review and its annual impairment testing process, TWE said it would recognise a $354 million non-cash impairment charge in its FY24 report, equating to $290 million post-tax.
It said the impairment would be treated as a material item in its FY24 report, relating to a $115 million write-down of goodwill and a $229 million write-down of “predominantly Commercial brands”.
TWE said these changes to the value “reflect moderated top-line expectations as a result of challenging market conditions for Commercial wine, across all markets, and the underperformance of TPB’s [Treasury Premium Brands] relative to the category”.
“These adverse trends have offset the benefits from TPB’s strategic focus to premiumise its portfolio,” TWE said.
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The company said its priority premium brands portfolio had delivered a three-year net sales revenue compounded annual growth rate of 10 per cent. This portfolio includes Wynn’s, Pepperjack, Squealing Pig and 19 Crimes.
TWE has not released its FY24 financial report but said it would do so on August 15.
The FY24 earnings before interest and tax are expected to be $658.1 million, a 12.8 per cent increase on the previous financial year.
In its report for the first half of FY24 released in February, TWE reported earnings before tax were down 5.8 per cent to $289.8 million, with its commercial portfolio sales declining by 6.5 per cent in the period.
At that time, TWE CEO Tim Ford said there was “strong consumer demand for our priority Luxury brand portfolio continuing around the globe”.
“The Premium wine category, whilst resilient, is highly competitive and we continue to innovate and invest to achieve the goal of outperforming the category,” he said.
At the time of writing TWE’s share price had increased by 1.55 per cent since the market opened this morning, to $11.77.
