Comment - A Praiseworthy Performance From Treasury Wine Estates' New CEO?

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When news broke in February that Michael Clarke was to move to Australia to lead Treasury Wine Estates, I advised the Englishman to pack a flak jacket.


That was after a fractious conference call had illuminated acute levels of frustration among analysts following a bumpy few months for the wine company.

Well, it turns out that Clarke packed platitudes, not protection, if his début call with analysts yesterday (8 April) was anything to go by. Of the 11 people who talked to him in the Q&A, eight were praised for the quality of their questions. (“You guys are full of great questions,” he exclaimed at one point. “You and the other analysts on this call are very clever,” he said at another.)

The charm offensive was not in vain - after the call, TWE's stock price rose by 7% yesterday. But, it was Clarke's other comments that likely appealed more to stakeholders seeking a firm hand on the tiller in the wake of TWE's stock write-down in the US and a big drop in half-year profits.

Mixed in with Clarke's odes to the intelligence of Australia's financal industry were a number of references to his hard-nosed business acumen, a quality he evidently feels he'll need to display to get TWE back making money for shareholders. On a number of occassions, he name-checked his previous job as CEO of UK-based Premier Foods, and went into detail on its position as a “distressed” company prior to him joining, and how he turned it around.

He also made it clear that, when it comes to terminating brands from the portfolio, he is “not emotionally attached to things”.

“I can assure you that if I have to be cold on an asset in this organisation, I will be cold,” he said.

But, when it comes to the US, Clarke may find he will have to work a bit harder to make friends.

It was clear yesterday that some analysts are very unhappy with Treasury's US unit, which one witheringly described as “a massive detriment of time, a massive detriment of capital, and a massive detriment to ... management”.

“I often wonder,” Merrill Lynch's David Errington added, “whether the board just wants to hold onto the asset for trips overseas ... because you just don't generate returns for shareholders.”

What was equally clear, though, is Clarke's determination to make a go of the unit - he is not about to cut it loose to boost short-term share price.

“I do feel this is a business that can improve and can get better,” he said.

Those thoughts were echoed further down TWE's management chain when I spoke to CMO Simon Marton at ProWein 2014 in Düsseldorf last month. Marton was passionate about the huge opportunities in what is the world's largest wine market. And, when you hear him identify the potentially lucrative “micro-markets” that exist within the US - be it the Hispanic community or the gay and lesbian community - you can't help but think that an even better question would be: Why on Earth would Treasury Wine NOT want to be in the US?

Clarke now has just over 100 days before TWE unveils its full-year results, which are not going to be pretty. However, if he starts cutting overheads and costs - as he said yesterday that he will do - and takes a scalpel to brands on what he called the "tail" of TWE's portfolio, then he may go some way to assuaging a few doubts about his appointment.

After that, maybe we will finally see some platitudes flowing in the other direction.

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