Australia’s biggest winemaker Treasury Wine Estates has cracked down on grey market imports in China and deliberately turned off the tap to global wholesalers to clear existing stock in a push to downsize its struggling business and focus on affluent drinkers.
Despite a 15.2 per cent earnings slump from the winemaker’s flagship brand Penfolds, chief executive Sam Fischer said demand for the luxury red wine remained strong in China after the company took “decisive action” to cut off Bin 407 shipments coming in from South-East Asia, Europe, America and Australasia, which have been undercutting official sales channels.
“It was having an impact on pricing. We weren’t getting the pricing that we wanted,” Fischer told analysts on a call on Thursday morning as he unveiled a $1.08 billion full-year loss.
“To preserve the strength of the brand and make sure that positioning stays intact, [we said] we would take strong action and reduce shipments again to show everyone in the trade across the region how serious we are in relation to taking control of our route to market in China and in those parallel flows.”
Customers are free to source products at the best possible price, said Fischer, who described parallel imports as a “legitimate” channel.
“Our job is to try and ensure that there’s no pricing arbitrage opportunities outside the market, that we address currency movements,” he said.
“We’re still finding areas of concern, and we’re taking strong action in relation to that.”
‘Sometimes the biggest opportunity isn’t finding the next growth story. It’s fixing the one the market has already given up on.’
Wealth Within senior analyst Filip Tortevski
Treasury Wine’s sales fell 12.8 per cent across its global business, driven by a 21.2 per cent slide in its Americas division – which includes brands like 19 Crimes, promoted by Snoop Dogg – that is undergoing an operational and strategic review.
The $3.8 billion wine giant attributed its billion-dollar loss to US-based asset impairments, supply chain restructuring costs, and write-downs of mid-tier and cheaper brands it is hoping to sell.
Mass market wine brands Wolf Blass, Lindeman’s, Yellowglen and Blossom Hill are back on the auction block as the company slashes its portfolio from about 76 brands to fewer than 30 amid a broader decline in wine consumption around the world, with people drinking less, but better-quality, wine.
Treasury Wine plans to cut $100 million in costs by fiscal 2029, leave US vineyards unplanted, and sell wineries and vineyards across California and Australia, to return to profit.
Investors shrugged off the company’s net loss to focus on growth signs in the critical China market and its US overhaul, with its shares gaining 4.9 per cent on Thursday.
Wealth Within senior analyst Filip Tortevski said Treasury’s results were reminiscent of Guzman y Gomez’s decision to pull the pin on its expensive US experiment, which was rewarded with a 9 per cent share price spike on the day of the announcement.
“America has been a problem for Treasury Wine for years, but management is finally making the tough calls, cutting excess capacity, reducing production and inventory and reassessing what the US business should look like,” said Tortevski.
However, Treasury’s share price of $5.77 is still a far cry from its 2018 and 2019 peaks of nearly $19, when Australian wine exports to China hit above $1 billion a year.
“If management can finally get America under control while continuing to grow Penfolds in China, a move back towards $10 over the next few years isn’t out of the question,” Tortevski added. “Sometimes the biggest opportunity isn’t finding the next growth story. It’s fixing the one the market has already given up on.”
MST Marquee’s senior analyst Craig Woolford warned his clients that “Treasury Wine is still undergoing its destocking and rationalisation of its brand portfolio, which means that [fiscal 2027 estimated] earnings remain below potential.”
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Jessica Yun is a business reporter covering retail and food for The Sydney Morning Herald and The Age.Connect via X or email.From our partners
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