Treasury Wine Estates profit slumps as it exits China

Treasury Wine Estates, the maker of Penfolds wines, today reported earnings before interest and taxes (EBITS) down 23 per cent in the first half year to $284 million as it was hit by China’s punishing tariffs against Australian products.

The slump, which was widely expected, was driven by the company’s exit from the premium China market and disruptions to high margin luxury wine sales elsewhere brought about by the Covid-19 pandemic.

However the company benefitted from strong sales in retail and e-commerce sales channels as consumer behaviour shifted towards in home consumption.

TWE, which also makes Wolf Blass, Lindeman’s, Seppelt, Wynns Coonawarra and numerous other brands, said the company was recovering from Covid-19 strongly, and was increasingly confident of its Penfolds and Icon luxury ranges from China to other markets.

The company confirmed a new divisional approach to give more focus to its luxury, mid-level and value brands.

Replacing a regional focus will be a Penfolds, Treasury Premium Brands and Treasury Americas divisional structure.

The company has been offloading cheaper commercial brands in the United States and building a luxury wine operation.

“These three divisions will be services by centralised business, supply and corporate functions.

“Establishment of the new operating model will maximise the benefits of separate focus across TWE’s brand portfolios.”

In response to China’s tariffs TWE has been accelerating its sales and marketing investment in other priority Asian markets and cutting overheads in China.

Picture: Penfolds

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