Treasury Wine Estates to "retire" brands that drag on core portfolio
TWE is re-positioning its business to focus on its core portfolio
Treasury Wines Estates (TWE) has confirmed it could “retire” or sell some of its “non-priority” brands as its looks to focus on its higher-end labels.
Speaking at the group's AGM earlier today, CEO Michael Clarke said that, out of its 80-plus brands, around 15 have the potential to be “global umbrella brands”. These include Penfold's, Wolf Blass and Lindeman's. Around another 20 “international brands” will be positioned alongside them, followed by 20 “local brands” to be used as exclusives.
But, he added: “We simply can’t invest consumer-marketing dollars effectively across 80 brands. The remaining non-priority commercial brands may be retired or might be addressed as part of a transaction or agreement with a third party.”
Clarke later described the non-priority brands as “a significant drag on our core portfolio”. Last month, it was reported that the firm could sell off some of it wineries and bottling plants.
Since joining as CEO in March, Clarke has led a significant cost-cutting programme to address the company's problems, which resulted in net losses of AUD100.9m (US$93.5m) in its last full financial year. Clarke has called this fiscal 12 months a “reset” year.
Many of TWE's problems have come from the US, where it announced a AUD160m (US$145.7m) last year to get rid of an excess of ageing stock. Clarke reiterated that the company's strategy in the country is to build and grow its luxury portfolio. He said sourcing “luxury” fruit is expensive and long-term contracts for supply are “scarce”. Clarke reportedly told reporters after the AGM the group is looking to buy a business that would give it access to luxury or 'masstige' grapes.
Turning to Asia, Clarke believes TWE's business is “underdeveloped” in China, Japan and Korea. Expanding the route-to-market, particularly in China, is a key priority for the group.
"Having the right route-to-market in one of the world’s largest and fastest-growing wine consuming markets (China) is critical to TWE’s vision of being a truly global wine company,” he said.
TWE's boss added that he is pleased with the group's first half for this year, which is ahead of the same period a year earlier.
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