Treasury Wine Estates (Australia)

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Treasury Wine Estates is one of the world's leading premium wine companies, concentrating primarily on New World wines. Lead brands include Penfolds, Lindeman's, Wolf Blass, Rosemount and 19 Crimes from Australia; Matua from New Zealand; and Beringer, Stag's Leap, Sterling, BV, Chateau St Jean and Blossom Hill from the US. One of Treasury's few Old World brands is Castello di Gabbiano from Italy, though it also distributes a number of other wines from France and Italy under contract in markets including China. It launched its first French wine Maison de Grand Esprit in 2017, and more recently launched new French wines under the Penfolds banner. Combined sales volumes in ye 2021 were 30.6m cases. In its home market of Australia, the group is the leading wine supplier by a wide margin, with 22% share by value in 2019: more than main rivals Pernod-Ricard and Accolade combined. It is the leading international wine company in the US (and #5 overall after local producers). The business was formed from the merger of the former Beringer Blass and Southcorp wine businesses under the ownership of what was originally Australia's Foster's Group. A series of financial problems in the latter half of the 2000s prompted Foster's to spin off the business as an independent company in 2011. That decade proved very challenging, and a series of apparently unsolicited approaches from potential buyers prompted TWE finally to put itself up for sale in 2014. No deal was concluded and the group remains independent. Performance slowly improved under new CEO Michael Clarke and TWE bolstered its portfolio with the acquisition of Diageo's wine brands in 2015. TWE's top-selling brand by volumes, and the global #9, is Beringer with volumes of 7.5m cases. However the group's most valuable brand is premium-priced Penfolds, which accounted for 31% of sales revenues in ye 2021 on volumes of 2.2m cases. Top-selling brand in the UK is Blossom Hill, the overall #6 wine in the UK, with take-home sales of £141m ye Apr 2019 (Nielsen in The Grocer), followed by Wolf Blass (£81m). One time leader Lindemans was in 3rd place (at £65m). Top selling brands in the US in 2018 were 19 Crimes (with almost 1.6m cases), Sterling Vintner's Collection, Matua, Chateau St Jean and Gabbiano. Revenues for the year to 2021 were A$2.6bn, with net profit of A$250m. The Americas accounted for 38% of revenues, Australia & New Zealand for 23%, Asia for 22% and Europe for 16%. Michael Clarke stepped down as CEO in 2020 to be replaced by Tim Ford, previously COO.

Capsule checked 27th March 2020

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Recent stories from Adbrands Update:

Adbrands Weekly Update 11th Mar 2021: Rumour and speculation continues to swirl around Treasury Wines Estates, most recently in the form of media reports that Pernod Ricard is considering a bid for the business. Meanwhile, TWE continues to scale back its 'value' range, agreeing a deal this week to license four lower-priced brands in the US to local giant The Wine Group. That company has acquired the US licenses to source and sell TWE's Coastal Estates and Meridian brands as well as two Beringer sub-brands Main & Vine and Founders' Estate.

Adbrands Weekly Update 9th Apr 2020: Treasury Wines Estates said it is giving strong consideration to a demerger of its flagship Penfolds business as a separate quoted company. If such a move goes ahead it is expected to complete by the end of 2021. As TWE CEO Michael Clarke explained, Penfolds accounts for only 10% of volumes but "well over half" of earnings. Separation would, he said, "facilitate the creation of incremental long-term value" in both resulting businesses. However, reaction to the announcement was mixed. Though TWE's share price rose sharply on the news, some analysts questioned the future of a "New TWE" if it is stripped of its powerhouse brand. [In the end, TWE abandoned the spin-off idea after a move by China to introduce steep tariffs on imported Australian wine.]

Adbrands Weekly Update 12th Apr 2018: Treasury Wines Estates is expected to announce a major imminent acquisition, with analysts pointing to Ste Michelle Wine Estates as the likely target. Ste Michelle is currently a division of tobacco giant Altria, and the owner of the US wine labels 14 Hands and Columbia Crest. Pricetag could be around $3bn. Another potential target could be much smaller Vintage Wine Estates, owner of Layer Cake and Cherry Pie. [Updated: in the end no deal materialised.]

Adbrands Weekly Update 18th Aug 2016: Treasury Wine Estates, the world's biggest quoted pure-play wine company, enjoyed a strong rebound after a few tough years in the early 2010s. Brands include Penfolds, Lindemans and Beringer. Performance was boosted by the bolt-on of most of Diageo's wine portfolio last October, led by Blossom Hill. Net sales for the year to June jumped 20% to A$2.23bn (around US$1.6bn), helped considerably by currencies. (At constant rates the increase was a still-impressive 13%). Net profit more than doubled to A$180m

Adbrands Weekly Update 15th Oct 2015: Diageo sealed a deal to transfer the bulk of its wine operations to Treasury Wine Estates of Australia in a deal worth around $600m in cash and assumed debt. The sale includes US wineries Sterling Vineyards, Rosenblum Cellars, Beaulieu and Blossom Hill, among others, and the UK-based Percy Fox distribution division. The only significant exclusions from the sale are the US-based Chalone brand and Acacia winery, Navarro Correas in Argentina, and the group's various regional wine merchant businesses, such as Justerini & Brooks in the UK. TWE is best-known for its Penfolds and Lindemans brands. CEO Michael Clarke said the deal will significantly increase the group's premium wine portfolio, but he also suggested it might ultimately divest lower-priced brands.

Adbrands Weekly Update 2nd Oct 2014: In an unexpected development, Treasury Wine Estates, owner of Beringer and Penfolds among other New World labels, has ended sale talks with rival suitors KKR and TPG Capital following consultation with its investors, and will instead press ahead with its existing turnaround plan. "Throughout the due diligence process," said the company, "the private equity bidders indicated support for management's strategic plans and roadmap. They also did not identify any major concerns with the business. However, it is now apparent to the Company that the bidders are not able to support a transaction on terms and at a price acceptable to the board."  A key stumbling block was the amount of debt that both private equity firms would have loaded onto Treasury.

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