Bushfire effect spreads across wine industry

The effect of Australia’s catastrophic summer of bushfires is spreading across food and beverage industries, with the maker of the iconic Grange wine, Treasury Wine Estates cutting its profit outlook for the year ahead.

Treasury’s CEO Michael Clark said in his report of results for the first half of the year that drought, heat and fires were challenges to the cost of production of the 2020 vintage.

Clark said: “While final impacts on the vintage are to be determined, TWE’s diversifies multi-regional sourcing model, combined with past investments in inventory which are allocated across multiple financial years, provides a degree of flexibility to manage vintage related impacts.”

Treasury, which has been booming on sales of its premium wine labels Penfolds, Wynns Coonawarra and Wolf Blass, cut its outlook for profit growth from 15 to 20 per cent, to 10 to 15 per cent.

“(This) reflects continued premiumisation and growth in luxury wine availability, balanced against the risks associated with challenging US wine market conditions persisting into FY21, and impacts from the cost of the 2020 Australian vintage.”

However the bushfires were a small black mark on otherwise strong margin growth by the company which is moving its products upmarket.

Earnings before interest and tax in the first half of the year was up six per cent to $367 million on net sales revenue up two per cent to $1.5 billion.

The company’s luxury and masstige (mass prestige) wine sales grew seven per cent in the first half and now represent 73 per cent of the company’s sales.

So called commercial wine volumes were down 10 per cent.

Picture: TWE

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