Does Michael Clarke deserve all the plaudits for  the turnaround at Treasury Wine Estates since he became CEO?

Does Michael Clarke deserve all the plaudits for the turnaround at Treasury Wine Estates since he became CEO?

For years, they said it couldn't be done. In wine, the theory goes, if you're playing a volume game then you can't all of a sudden make the switch to a value-focussed strategy. And, for a long time, they were right: Talk in recent years of getting consumers to trade up their wine choices has fallen on deaf ears. Within the space of just two years, however, Treasury Wine Estates has proved the theory wrong.

It was back in late-June 2014 that TWE took an impairment charge of AUD260m (then US$243.6m), due in no small part to what it described at the time as the "decline in market growth rates for commercial wine globally". The hit preceded an AUD160m (then US$145.7m) writedown in mid-2013 and a profit warning at the start of 2014.

Fast forward to last week, however, and the group boasted soaring profits - which more than doubled - in the 12 months to the end of June, on the back of a 20% lift in sales. Much as the scene was set a year ago, when losses turned to profits in fiscal-2015, the rudeness of TWE's health today is little short of profane.

Consider the group's share price: In January 2013, shares were trading down at AUD3.64. At the close today, they're sitting much prettier at AUD11.03.

Much will be made of the effect Michael Clarke has had on TWE since assuming the CEO role in March 2014. Indeed, as Clarke himself concedes in a recent interview with the Financial Times, his time with previous employer Premier Foods gave him valuable experience in introducing a turnaround strategy.

In his near-two-and-a-half years in charge, Clarke has brought in his own team, but this has been limited to TWE's priority markets. Robert Foye, formerly Coca-Cola Co's customer & commercial VP for Asia-Pacific, was recruited two years ago to head up Asia for the group, while Bob Spooner - who worked with Clarke at Premier - now leads the US division for TWE. Yet, while there has also been a change of CFO at the group, I wouldn't class Clarke's HR efforts as being anywhere near the scale of, say, Ivan Menezes' at Diageo in recent years. More, what these moves serve to highlight is where TWE is set to focus its efforts going forward: Asia was credited by Clarke a year ago as delivering "outstanding growth", while the potential for wine producers in the US - when done right - is not wasted on TWE, particularly as it is well aware of how to do it wrong in the country.

Hats deserve to be doffed, then, not only to Clarke but also to Treasury more broadly, where the buy-in into Clarke's fresh approach is reaping rewards.

What strikes me as curious, though, is Clarke's statement to the FT in June that "I have brought FMCG practices to wine". Surely, such an approach jars with the switch from volume to value? After all, stripping out the recently-purchased assets from Diageo, the company's volumes in fiscal-2016 came in flat (+0.2%): Sales, though, were up 9.4%.

Is Clarke - and TWE - rewriting the guide on how to succeed in the wine industry? It will make for one fascinating case study in years to come.