Late last month, Treasury Wine Estates announced the acquisition of Daou Vineyards in the Paso Robles region of California. Treasury Americas’ president, Ben Dollard, explains the thinking behind the up-to-US$1bn purchase.
Global Drinks Intel: What was the appeal of Daou Vineyards?
Treasury Americas president Ben Dollard: We’d been observing what Georges and Daniel [Daou] have been creating certainly over the last five years when the brand started to gain some traction. From the outset, they had a vision to put Paso Robles on the map – They saw enormous potential in the region’s terroir and climate. To that end, they saw the opportunity to create a Bordeaux-style red blend, with the consumer as their guiding light.
When you think about all the great brands that have come into this business, none of them were overnight successes. That’s the same with Daou. They’ve done a great job, particularly in the on-premise, of curating an experience with the consumer, who loves the brand. Here in the US, and particularly here in California, it’s a very well-known brand. Our goal is to nurture and grow that.
GDI: Treasury’s spending around two-thirds of its total annual sales on Daou. That looks like a big bet.
BD: We believe it’s a perfect complement to our portfolio. Over the last three years, we’ve been reimagining our US business and we’ve gone through a deliberate and significant [review of] the structure of our portfolio around where the consumer is going and the premiumisation of the category. Over that time, we’ve divested a lot of our more commercial brands and we acquired Frank Family [Vineyards], which was a really big opportunity around luxury Chardonnay.
I don’t necessarily see it as a big bet, I see it as a very strategic opportunity to grow our business and grow the Daou brand, which has great representation here in the US. We also see a significant opportunity globally – with the footprint and capabilities that Treasury has around the world, it’s a combined opportunity between our businesses.
It feels like a very important strategic fit in terms of how we’re thinking about growth and the consumer here in the US and abroad.
GDI: Can you speak to the international opportunity for Daou?
BD: Early on in our conversations with Georges and Daniel, they felt very strongly that Daou has global potential. As we’ve got to know the brand, we agree with them. The foundations are very strong.
The Daou Cabernet Sauvignon has garnered incredible traction in the US and we see that as a launch pad for us to do a lot more. Our ability to tell that story globally is an important opportunity. As Penfolds has established a global reputation, we feel Daou can replicate that over time.
The immediate opportunity is in Canada and in South America, where high-end US wines are gaining real traction.
GDI: Why could the portfolio gap Treasury identified not be filled by premiumising within the existing portfolio?
BD: I’m really confident in our ability to manage our portfolio, which has well-known, established brands such as Penfolds, Stags Leap, Frank Family, Beaulieu and Beringer that have ongoing potential. I also think that expanding into other regions, certainly here in California, is a natural next step for us.
Daou has done an amazing job of talking to and engaging with the next generation of luxury consumers who are coming into wine at $25 [per bottle]. That’s really appealing to us.
GDI: What does this acquisition say about Penfold’s position in the US?
BD: Through our commitment to engaging with the luxury consumer, it reinforces the opportunity we see for Penfolds. We’re seeing really good success with Penfolds here in the US, particularly in the on-premise with Bin 389. We expect that to continue. Our focus on Penfolds is absolute.
Around 25 years ago, Penfold saw an opportunity to produce wine in California and planted some vineyards in Paso Robles. Here we are now buying a brand with its roots in Paso Robles. So, it’s really exciting to see these come together.
GDI: Is there still a tail of brands that are surplus to Treasury’s premiumisation strategy?
BD: We see our business in two parts – how consumers engage at under $20 [per bottle] and how they engage above $20. The experiences are quite different.
With brands like Matua or 19 Crimes – we’ve developed a relationship with what we call ‘19 Crimes Modern’ – our ability to innovate in that space is really exciting. By no means does an acquisition like Daou take away from our ability to innovate. 19 Crimes plays a really important role in challenging ourselves to bring new consumers into the category. We’re seeing that in our relationship with Snoop and Martha Stewart, for example.
For the future, absolutely the development of our luxury portfolio is a priority.
That said, we want to continue to innovate and be bold around those brands that have some scale today. The marketplace in the US is well-situated to introduce new consumers to the category and those consumers will come in at different price points. We’re really well positioned – and can do both.
GDI: Will we see more portfolio consolidation going forward?
BD: We’re very pleased with the portfolio we have now. We’ve got a good track record of innovation that we’re going to continue to push – innovation drives a lot of the growth in the category today. We want to continue to be an important part of that.
We’re going to have plenty to keep us busy.
GDI: The recent headlines around Treasury as a group have centred around the loss of China as a market for Australian wine and the stagnant performances of the Premium Brands division. Is there pressure on Treasury Americas to lead on growth?
BD: This acquisition is reinforcement of the opportunity we see in the US – it continues to be the world’s largest luxury wine market.
The opportunity to engage the next generation of consumers is absolute. I’m generally optimistic with regards to the role wine can play in people’s lifestyles. To that end, Treasury Americas is well-positioned to continue to capture that opportunity.
Do I feel any pressure? I get excited more than anything else.
GDI: The group sailed quite close to demerging the Penfolds division in 2020. is that on the table for Treasury Americas?
BD: We’re very consistent in our approach to the role that Treasury Americas plays for the broader company – it’s a key strategic pillar as much as Penfolds is. Penfolds is a really important part of our US business and an important part of Treasury overall.
The opportunity we have and the way the portfolio is structured today – a lot of work’s been done to get us to this point.
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