Treasury Wine Estates sees luxury growth but struggles with budget brands

Treasury Wine Estates’ results for the six months until the end of December were a curate’s egg. Sales of its Luxury grouping of wines, which now generates 56% of revenues, grew by 52% (18.2% organically) while the recently purchased Daou vineyards in California saw earnings increase by 11.2%. The post Treasury Wine Estates sees luxury growth but struggles with budget brands appeared first on The Drinks Business.

Feb 13, 2025 - 12:13

Treasury Wine Estates sees luxury growth but struggles with budget brands

Treasury Wine Estates’ results for the six months until the end of December were a curate’s egg.

At the top end of the market, sales of its Luxury grouping of wines, which now generates 56% of revenues, grew by 52% (18.2% organically) while the recently purchased Daou vineyards in California saw earnings increase by 11.2%. Net profits jumped 33% to AU$239.6 million (£121 million) in the six months, just short of analysts’ aggregated expectations. On the downside, however, Treasury was forced to cut its forecast for profits in the full year to the end of June to the bottom of its previous predictions. It now expects pre-tax profit of about AU$780 million compared with an earlier estimate of AU$780 million to AU$810 million. This is because it has failed to attract an acceptable offer for its budget-priced drinks division including Blossom Hill, Wolf Blass and Lindeman’s and remains locked into grape contracts with growers as demand falls.

Oversupply issues

"The offers received for these brands did not represent compelling value and therefore their retention is the best course", Treasury said. With drinkers turning away from cheap wines, especially in its home market and the country still suffering from an ocean of oversupply, pre-tax profit from the "premium brands" unit, which includes its cheaper wine labels, halved, partly "reflecting softness in consumer demand for wine at lower price points". Chief executive Tim Ford confirmed the trend for people to drink less but better. Sales for the Premium and Commercial portfolios fell by 4.9% from an already depressed level the year earlier. Last year Pernod Ricard successfully unloaded its under-performing Antipodean wines operation to Australian Wine Holdco, the consortium led by Bain & Co. The Bain grouping, which had previously bought Accolade when Carlyle decided to abandon its investments in Australian wine, had also held talks with Australian Vintage, the third largest producer, which itself is undergoing a radical overhaul in the face of the industry’s difficulties.

Penfolds and China

Ford said that Treasury’s results highlighted “the benefits of our multiyear transformation into a luxury-led business.” He said he was particularly pleased to have “successfully reestablished the Penfolds country of origin portfolio in China” following the lifting of the punitive tariffs that hit sales there for three years. He also pointed out that the integration of Daou was progressing ahead of expectations and that the resulting synergies should be US$35 million compared to the previously forecast US$20 million. Treasury’s American operation, which also includes Beringer, could also benefit the group if President Trump carries out his threat to impose tariffs on imported goods. Alongside Daou it also has an extensive Penfolds presence in the US which could give it an advantage over more expensive imported luxury wines. The Penfolds brands, which are now sourced from holdings in France as well as the US and Australia, enjoyed a very strong six months with sales jumping by 25% Treasury says it is “progressing preparations” for transition to a “Global Premium Division” from mid-2026.