‘There’s nothing but positive news around Penfolds being back in China’ – Treasury Wine Estates CEO Tim Ford speaks to Global Drinks Intel

GDI: Daou’s contribution to the group looks healthy (sales up 20% year-on-year).

TF: It’s a business that’s been growing well ahead of the category for three or four years now and has continued to do so even through the transition period. When you’re going through an integration, which usually includes some distribution changes, there’s a potential for things to slow down.

The Daou brand is very strong with consumers – it’s at a great price point and has great quality at that price point. Seven months in, we’re really happy with it.

GDI: What are your plans for Daou beyond its domestic presence?

TF: While there’s huge opportunity for distribution growth in the US, one of the attractive parts of this brand for us was that we certainly believe we can take it to other markets around the world.

You’ll start to see Daou more in the UK, for example – it’s already in some of the more top-end parts of the UK market. We certainly see the brand’s ‘discovery’ tier becoming part of its presence, particularly in Asia and Europe. The brand’s really strong enough and will resonate with Asian consumers.

GDI: With the business consolidation you’re undertaking, how confident are you that Treasury will have sufficient resources to maximise the Daou opportunity abroad?

TF: The commercial brands that we’re divesting, which include Lindeman’s, Wolf Blass and Blossom Hill, are part of a retail-driven, low-overhead, low-cost business. We have separate teams today that are focused on our luxury sales and marketing. As those brands exit the business, we’ll certainly reshape those parts that they come out of. However, it won’t impact the luxury side at all.

What it will do is allow us to double-down on our luxury growth strategy.

GDI: Turning to Penfolds and the return to China for its Australian varietals, are you seeing the same softness of consumer sentiment in the country as other alcohol brand owners have noted in recent weeks?

TF: Consumer appetite for Penfolds in China is very strong, just from the strength of the brand. We started shipping back into the market in the last quarter (three months to the end of June) – all our customers are reordering for this next quarter, which means they’ve depleted through their inventory.

It’s early days in terms of consumer depletions; by the time that stock gets through the distribution network, we’ve really only been on shelf for a few months. That said, initial sales are where we expected them to be.

There’s a lot of negative noise around spirits in China, but the reality is, a lot of those companies are lapping pretty significant growth from the previous couple of years – we’re lapping zero. From our point of view, it’s about re-establishing and rebuilding in a category that has declined, but it’s still big. We still think we can develop the category now Penfolds is back in the market.

So far, there’s nothing but positive news for Penfolds being back in China. So, it’s a good start.

GDI: Should we expect a rollercoaster, up-then-down performance for Penfolds in China, going forward?

TF: I think it’ll be fairly consistent over half one (six months to the end of December) and half two (to the end of June 2025). We may be up a little bit more in the first half, because we’ll want the right level of inventory in the market for Chinese New Year. I don’t see us having a big spike and then nothing in the second half, that’s for sure.

GDI: Did the outcome of Treasury’s strategic review surprise you in any way?

TF: No! It took a little while to get there but the findings are what we expected. Our inter-business relationships are very good – we’ve now got to keep them that way. 

GDI: Are you clearing out all of Treasury’s ‘commercial’ wine assets or will you hold on to some brands?

TF: It’s very much focused on our big four, below-AUD10, commercial brands – Blossom Hill, Lindeman’s, Wolf Blass and Yellowglen. They account for quite a substantial level of volume – about a third of the group’s – but only around 5% of our gross profits. They’re also a declining part of our business and they don’t support our luxury strategy. That’s why we’ve decided to act.

GDI: How confident are you in finding a buyer?

TF: We’ve had in-bound interest both before and since we announced, which suggests there are buyers around the world whose business strategy is about scale and volume – it’s just not ours.

This is still a significant scale/volume business that would be additive. What the value of those offers end up looking like, time will tell. But there’s been enough interest to suggest to us that we should formally put a process in place.

GDI: Are you looking for a one-off transaction or would you consider piecemeal purchases?

TF: We’re not sure; it could be either/or. It depends on what the best value outcome is for us.

It’s hard to put an end date on this, but I expect it will be a matter of months.