Treasury Wine Estates (TWE) will change the release date of its famed Penfolds wines to October, split the luxury brands from everyday wines such as Yellowglen and write down a further $260 million in its value as part of a major shake up under new CEO Michael Clarke.
Clarke, who took on the role on March 31, blamed a number of factors for this further hit to the company’s bottom line, including a global fall in market growth for commercial wines and their brand value, declining assets and yet another re-evaluation of the business since it was split from Foster’s in 2011. It follows a further $160m cut just 12 months ago, in addition to a $1.3 billion write-down in early 2011.
“Today’s announcement of an asset impairment further highlights the need for TWE to do things differently,” Mr Clarke said. “The current business model is not being optimised and fails to reflect the Company’s outstanding capability, brands and people.”
He described fiscal 2015 as a “reset year” for the company.
“We have already taken significant steps to reset consumer marketing investment, our cost base and business model, and over the coming year we must fully realise the benefits of these changes” Clarke said.
The company “premiumisation” strategy will pour more money into consumer marketing and move the release of its Penfolds Bin Series and Penfolds Icon & Luxury Collection wines to one combined annual release, commencing 16 October 2014.
“An October release for Penfolds wines is fully supported by our winemaking teams,” Clarke said.
Penfolds’ Chief Winemaker, Peter Gago, said his winemakers are normally busy with vintage when the wines were released in March and May, so the shift will give them more time to assist with the marketing push.
“An October release frees them up to provide the support our Bin Series and Icon & Luxury wines deserve,” he said.
Next month Treasury will launch a 3-month marketing campaign offering consumers a discount wine fridge when they buy premium Penfolds wines.
Clarke described it as the biggest consumer promotion TWE has ever undertaken.
TWE owns a range of labels, including T’Gallant, Seppelts, Fifth Leg, Lindemans, Yellowglen and Jamieson’s Run.
As part of the restructure, the company will split the commercial brand portfolio in Australia from its “luxury and masstige” portfolio, reflecting a move already underway in its US portfolio.
“The commercial wine market is markedly different to that of luxury and masstige and we need to consider new operating models and ways of working to realise growth and improve profitability across both,” Clarke said.
Australian general manager Angus McPherson will lead with commercial division with Simon Marton, currently chief marketing officer, will lead the luxury division.
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