Treasury Wine Estates in huge US wine brand buy

Penfolds maker Treasury Wine Estates (TWE) has secured a leading position in the US luxury wine market with a surprise US$900 million acquisition of US luxury wine business DAOU Vineyards.

The purchase, which will be funded by an Au$825 million equity raising, brings the US’s fastest growing luxury brand into the TWE global stable which has itself been moving upmarket since sales were disrupted by China’s imposition of import tariffs on Australian wine.

Based in Paso Robles, California, the purchase fills a gap in the company’s US portfolio in the US20-$40 per bottle price range, bolstering existing TWE offerings that sell for above US40 per bottle.

Interestingly DAOU’s main areas of operation is the Adelaida area of California – TWE itself has its roots in South Australia’s Barossa Valley and its iconic Grange was developed at the Magill Estate, in suburban Adelaide.

TWE CEO Tim Ford said: “The acquisition reflects the continuation and acceleration of our luxury-led portfolio premiumisation strategy with the luxury portfolio now contributing 50 percent of Group NSR (net sales revenue)and the quality of TWE’s and Treasury America’s operating metrics improving immediately and in the future.”

The acquisition is intended to give the company the scale to support a future standalone Treasury Americas Luxury division.

Ford said: “We continue to see strong long-term growth trends for luxury wine in TWE’s key global markets, with a significant value creation opportunity leveraging and building on the strengths of TWE, Penfolds, Treasury and DAOU to create a multi-brand global luxury wine business of scale.”

The China shake up of the wine market is actually proving a blessing for TWE which has been reporting increasing profits and margins in recent years despite steady or slightly declining sales.

The jolt it gave the company has seen it streamline its operations and supply chains, invest in high margin brands and divest itself of lower margin commercial wine brands and vineyards.

Even in China, TWE was able to respond by importing wine from other locations globally and launching its first Chinese made wines.

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Luxury wines come good for Penfolds restructure

Picture: DAOU Vineyards