CheaperC wines a weight on TWE
Treasury Wine Estates – the makers of Penfolds, Wolf Blass, Wynns and 19 Crimes – says a downturn in consumption of its cheaper wines is expected to continue, forcing it to cut costs, consider new supply arrangements and divest some brands.
The poorer outlook was also driven by the 19 Crimes brand, which had become popular thanks to tie-ups with celebrities including US rapper Snoop Dogg but is now performing below expectations.
Treasury Wine chief executive Tim Ford said the winemaker would implement initiatives to deliver greater operational and strategic flexibility to help return the wine brands to growth.
These include slimming down and making its structures more efficient, a review of its commercial wine supply chains, particularly in Australia, and exploring the sale or rationalisation of some of its wine assets.
Despite softer trading conditions for lower-priced wines, the demand for its premium and luxury portfolio remained strong, led by its powerhouse brand Penfolds.
Treasury Wine has updated its earnings outlook based on these factors and changing market conditions, announcing on Thursday that it now expected group sales for 2023 to fall 2 to 3 per cent compared with 2022, with declines in its Treasury Americas division and Treasury Premium Brands (its cheaper wines) to be partly offset by growth for Penfolds.
Treasury Wine was now expecting earnings of between $580m and $590m, representing growth of 11 per cent to 13 per cent, with group earnings margins of about 23.5 per cent, up from 21.1 per cent in 2022.
“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,” Mr Ford said.