TWE's turnaround

The Australian group has unveiled its plan to make up for losses in China.

TWE reports on its future plans for its portfolio
TWE reports on its future plans for its portfolio

Australia's largest wine company Treasury Wine Estates (TWE) has de facto lost its most important market due to the trade dispute with China and the tariffs of up to 218 percent that have been in force since the end of November 2020. Now, the company is presenting plans to compensate these losses on other markets and is giving concrete growth figures.

Back in February, TWE reported that it planned to shift its focus to the USA due to the problems in the Chinese market (LINK). With the reorganisation of its brands into the three divisions (Penfolds, Treasury Premium Brands and Treasury Americas) and a concentration on the premium brands (over AU$10), the company wants to stabilise the profit first. Thus, it expects earnings of between AU$495-515 million this year. That would be a decline from about AU$533 million the year before. In the long run, the company is aiming at a profit growth in the "high single-digit range."


TWE's CEO Tim Ford with new strategies


For the new Penfolds unit, they are aiming at margins of 40-50 percent. In 2020, it was 47 percent with a profit of AU$357 million. Accordingly, they want to use this brand in particular to expand their position in other markets with their awareness.Treasury Premium Brands is expected to achieve margins in the "high teens" (up from nine percent last year) and Treasury Americas around 35 percent, which would be a doubling of twelve percent.

"The effective closure of the Chinese market to the Australian wine category was a significant event for Treasury, but we are truly excited by the opportunity this now presents to us," CEO Tim Ford is quoted as saying. China was TWE's most important market with a turnover of about AU$500 million — more than one third of the total turnover. 

The company also wants to take off in other Asian markets such as South Korea, Thailand and Singapore, but this will take at least 2 to 5 years, it says, and will vary in speed depending on the country. aw



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