Treasury Wine Estates cuts profit forecast following US market turmoil

Treasury Wine Estates has revised its earnings forecast downwards, citing lower premium shipments and economic uncertainty in the US. The move comes just weeks before its annual results and suggests major distribution challenges in California. Treasury Wine Estates has been forced to cut its profits forecast because of “lower-than-expected premium portfolio shipments in the US”. The company said that it now expects its earnings before interest and taxes (EBITs) to be about AU$780 million rather than the figure of “approximately AU$780 million” it set back in February. That figure was also a downward estimate. To issue a lower forecast less than a month before Treasury is due to release its annual financial results on June 30 is unusual and reflects the chaos in the American market for drinks.

US market instability adds pressure

Consumers continue to draw in their horns in the face of inflation and the uncertainty caused by President Trump’s erratic statements on tariffs. Treasury said the “economic uncertainty and weaker consumer demand” in the US has hit the performance of the “wine category … at price points below US$15”.

Distributor exit adds to disruption in California

The company also informed shareholders of upheaval in its California market, where its distributor, Republic National Distributing Company (RNDC), is ceasing to operate in September. In the half year to Christmas, Treasury’s sales through RNDC in California accounted for around 25% of the net sales revenue from its Americas division and approximately 10% of group net sales revenue.

Contingency plans in place amid distribution shake-up

The group said RNDC’s move would not affect its financial results in its current financial year, but that it has “begun evaluating alternative distribution arrangements for its portfolio in California to determine an appropriate path forward. “TWE’s relationship with RNDC spans 25 US states, including California. The closure of RNDC’s California operations is not expected to impact the remainder of its business, and RNDC has reiterated its commitment to investing behind and driving TWE’s portfolio in the remaining 24 states.”

RNDC faces widespread industry challenges

RNDC itself is undergoing a torrid time. Only last week, Brown-Forman announced that it was ditching the Texas-based group as its distributor in 11 US states as part of a radical shake-up of its distribution. The distribution giant, America’s second largest, had been its national partner for more than 60 years. Earlier this year, Nick Mehall, the chief executive, resigned following the loss of distributorships with Sazerac, the New Orleans-based speciality spirits group.