Treasury Wine Estates is looking to return to growth by inorganic means, spending up to US$1bn on Daou Vineyards in California.
The Paso Robles-based business, founded by Daniel and Georges Daou in 2007, will cost Treasury $900m to start with, while a maximum of $100m will apply on an earn-out basis. The Penfolds brand owner has positioned the transaction as representing a “key portfolio opportunity for Treasury Americas in the $20-$40 [per bottle] range” and could lead to a standalone ‘Treasury Americas Luxury’ division going forward.
Completion is expected by the end of this year.
Today’s announcement comes just over two months after Treasury reported a 5% fall in full-year sales to the end of June, the company’s fourth successive annual top-line decline from fiscal 2019’s high of AUD2.83bn to 2023’s AUD2.42bn. The purchase also raises the possibility of a demerger move in the future, a step that came under consideration for Penfolds back in 2020. Treasury stepped back from spinning off its flagship brand, choosing instead to redraw its reporting divisions to include a Penfolds-dedicated unit.
According to the group, Daou is in rude health in what it maintains is the “world’s largest luxury wine market”. Citing figures from IWSR Drinks Market Analysis, Treasury said that for wines priced at $20-plus, the US delivered a five-year compound annual growth rate [CAGR] to 2022 of +7.4%. Daou’s sales last year totalled $164m, up 30% on 2021, with almost 70% of its sales in the $20-$40 price range.
“This is a transformative acquisition that accelerates the growth of our luxury portfolio globally,” said CEO Tim Ford. “We have grand plans for Daou to become the next brand with the international scale and luxury credentials of Penfolds.”
Co-founders Daniel and Georges Daou added: “The last frontier has always been international, and as part of the Treasury Wine Estates portfolio, we have unlocked the potential to be amongst the highest-end wines for consumers to enjoy globally.”
The brothers will remain with the business once the ownership transition has been completed.
See below for a Treasury-sourced video on today’s announcement.
A company presentation to investors can be viewed here.
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