Wynns, Pepperjack, Squealing Pig, and 19 Grimes will be priority brands for Treasury Wine Estates as it looks to adjust its operating model and potentially offload some of its portfolio.
TWE started its premiumisation strategy in FY21, with Treasury Premium Brands (TPB) improving 13 per cent and contributing 60 per cent of division NSR.
Consumer demand for Luxury wine remains strong in all markets globally, with sales in Penfolds, Treasury Americas, and Treasury Premium Brands in line with expectations.
TWE participates in three price segments: Luxury ($30+), Premium ($10-30), and Commercial (below $10).
The US market remains a challenging one for TWE’s entry-level Premium brands and have shown signs of deteriorating, the company said. Its brand 18 Grimes has continued to perform below expectations.
The company said the market trends for Commercial wine is challenging, with Australia and the UK being particularly problematic. It expects the declining lower margin Commercial portfolio in TPB, combined with rising inflation hitting packaging materials in particular to put upward pressure on the company’s costs of goods in FY24.
CEO Tim Ford said a range of strategies were designed to provide more operational and strategic flexibility to allow more growth in its Premium and Luxury portfolios. TPB’s operating model and organisational structure will be reviewed in the framework of the business’s future scale.
“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 premiumisation and growth strategy,” Ford said.
He said divesting or rationalising some assets either individually or in combination was one of the ideas being considered.
TWE will also review the supply chain for its Commercial wine business, particularly in Australia. The goal being to improve operational flexibility and reduce the total network cost to improve cost of goods sold.
“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 grow our Premium and Luxury portfolios,” Ford said.
More details will be provided when its FY23 full year results are announced in August.
