Treasury Wine Estates has shared what the group has called its “transformation plans”, which include the intention to reduce the size of its portfolio from 76 brands to “less than 30”.
In a series of presentations to analysts and shareholders at its scheduled Investor Day today (4 June), the Penfolds owner followed the recent confirmation of a new business model with further plans for the medium- to long-term. Among the plans is the positioning of three “power brands” backed by seven “regional heroes”.
Treasury said it expects the ten to account for around 90% of its group sales “within five years”.
The group set the scene by highlighting three “portfolio pillars” – luxury red wine, luxury white wine and modern refreshment – linking its Daou, Matua and Penfolds marks to these priorities. The trio, which currently account for 54% of total sales, will be supported by seven regional marks – Beaulieu Vineyard, Coldstream Hills, Frank Family Vineyards, Pepperjack, Squealing Pig, Stags Leap and Wynns – which combined make up 14% of sales.
Of the brands that did not make the list, 19 Crimes, Blossom Hill and Lindeman’s were identified as having “an important role in supporting customer needs, particularly in the UK and Europe, during the multi-year transition period”.
The remainder, meanwhile, will be “managed through four alternative pathways over time, with a strong focus on volume transition”. The options are to transition – reducing production and sales – to deploy tactically – retaining in specific markets or channels – to divest or to retire.
Almost two years ago, Treasury concluded a strategic review and subsequently commenced the search for a buyer for its cheaper ‘commercial’ brands. The project was abandoned in February last year as the “offers received for these brands did not represent compelling value and therefore their retention is the best course of action”.
At today’s meeting, CEO Sam Fischer said: “Premiumisation remains a powerful long-term trend, with consumers increasingly choosing to drink less but better. At the same time, we’re also seeing strong growth in lighter styles, more relaxed social occasions and moderation trends, particularly among younger consumers.
“We’re reshaping Treasury Wine Estates to where we see the strongest long-term demand and growth opportunities in luxury red, luxury white and more contemporary wine experiences.”
Also announced was an operational simplification that will see selected assets – “primarily in California and Australia – be optimised, sold or retired. Subsequently, a “strategic and operational review” of the business in the Americas region will be undertaken.
In results from the six months to the end of December, announced in February, the Melbourne-headquartered brand owner posted a near-17% slide in year-on-year sales. Treasury is scheduled to announced if numbers from the second half of its fiscal year (to the end of June) on 19 August.
