Penfolds maker eyes ‘power’ wines as palates shift
One of Australia’s world-class winemakers says wine drinkers’ attitudes are evolving in favor of lower drinkers, but with a focus on premium varieties.
Treasury Wine Estates, owner of the globally renowned luxury brand Penfolds, now plans to focus the bulk of its resources on its top 10 “power brands”.
This segment, which includes Penfolds, Daou and Matua, currently provides 72 percent of gross profit against 25 percent of the listed company’s wine volume.
“Our strength brands will represent the greatest growth opportunities,” CEO Sam Fischer told investors at a strategy day on Thursday.
“These are scalable brands that have the ability to win across multiple markets.
“Collectively, they will receive disproportionate investment and organizational focus to support our growth ambition.”
For example, Treasury Wine’s luxury red wines, which include blends of Cabernet, Shiraz and Pinot Noir, are already performing well in China, the rest of Asia and Australia.
The same story goes for luxury whites such as Chardonnay, Sauvignon Blanc, and sparkling wines produced under the Penfolds Yattarna, Frank Family and Doau brands.
“Wine has played an enduring role in society for thousands of years,” Mr. Fischer said.
“People around the world enjoy wine as they celebrate, connect and relax, and while we believe these essential events will continue, we need to recognize that wine consumption is also changing.
“As people drink less but better, luxury wine remains highly attractive, aided by the ‘premiumisation’ trend.”
At the same time, Treasury Wine said consumers are looking for lighter types of wine, including low-alcohol varieties that currently account for about 30 percent of its volume.
These wines, which are ‘regional heroes’ such as Wynns, Squealing Pig, Stags’ Leap and Coldream Hills, are also candidates for further investment.
“Our ‘future state’ portfolio will be concentrated around three clear growth pillars,” Mr. Fischer said.
“To strengthen our red wine leadership, luxury red wine leadership in key markets, establish a stronger position in luxury white wine and grow our ‘modern refreshment’ position.”
But Mr. Fischer also pointed to the possible sale of some of the group’s business in the Americas, which is pending review.
He noted supply chain issues at vineyards in California, adding that the company had already reduced grower recruitment and left some fallow.
“We are currently unable to generate an appropriate level of return for the capital we have committed to this business and the focus of the review will be to evaluate a range of options,” Mr Fischer said.
“These options may include further improving our operating model, accelerating initiatives in the supply chain, or selling selected brands or assets.”
In February, the group reported a first-half net loss of $649.4 million due to previously flagged impairments on its US assets.
Excluding this impact, interim net profit fell 46.3 percent to $128.5 million, while earnings before interest and tax were $236.4 million.
Treasury Wines currently forecasts underlying earnings for the full year 2025/26 to be between $480 million and $490 million.
The company’s shares rose 12 percent to $4.62 in early trading.
