Australian winemaker and distributor Treasury Wines Estate (TWE) plans to cut costs and sell off underperforming brands as consumption trends change.
In an ASX announcement, the winemaker said that it will continue to “premiumise” and focus more on growing its higher-value and luxury portfolio which includes brands such as Wynns, Pepperjack, Squealing Pig and 19 Crimes across key global markets.
In Australia and the UK, market trends and consumption outlook for commercial wine (below $10) remain “challenged” while category consumption trends for entry-level premium wine ($10 – $30) have continued to deteriorate in the US.
The 19 Crimes brand, which has American rapper Snoop Dogg as its ambassador, has continued to perform below expectations.
In this financial year, the group expects net sales revenue to decline 2-3 per cent while EBITS to range between $580 million to $590 million.
TWE’s CEO, Tim Ford, said the business is “proactively” assessing its performance, structure and cost base to deliver on its premiumisation and growth strategy.
“With changing consumer preferences and a tightening economic environment in most major markets, we’re taking the opportunity to make changes in our business now, so we have increased flexibility in the future to continue to grow our premium and luxury portfolios.”
To enable continued growth moving forward, TWE will undertake a review of its commercial wine supply in Australia and improve operational flexibility and reduce network costs while adjusting its organisational structure and model.
The company is also exploring the “divestiture and/or rationalisation” of selected assets, either individually or in combination.
Despite soft demand, the winemaker says luxury sales in its Penfolds division have gained “strong momentum” complemented by growth in its Treasury Americas division and Treasury premium brands are in line with expectations.