NEWS
TWE IS MAKING PREPARATIONS TO RE-ALLOCATE AUSSIE-MADE PENFOLDS TO CHINESE MARKET
By Siulan Law Mathews DipWSET
7-7-2023
Source: Penfolds
Australia's Treasury Wine Estates (TWE) is making preparations to re-allocate Australian made high-end Penfolds wine to the Chinese market as the prospect of China lifting punitive tariffs on Australian wines improves.
TWE chief executive Tim Ford told Australian media that the company will delay decisions on allocations to different countries of its annual vintage of high-end Penfolds wine for a few months to keep its options open.
“It’s prudent to give ourselves some flexibility,” Ford told Australian media.
But he pledged not to cut back on allocations to the very markets that helped save it from the China ban.
“We’re not going to short markets, so to speak,” he said. “We’ll just monitor where we allocate over the next four to five months.”
“If China reopens, demand will be above supply,” he added.
The Penfolds division delivered a 14.2 percent increase in earnings to AUD365 million (USD228m) in 2022-23.
In late 2022, TWE launched the One by Penfolds wines made in China with grapes from the Ningxia region. The wine is priced at around AUD50 per bottle and has achieved sales of 100,000 cases thus far.
Ford said overall consumer demand for premium wine is expected to stay consistent over the next year, but conditions are difficult in the lower-tier segments below USD10 a bottle. “We do expect the decline in commercial wine to continue,” he said.
TWE’s premium brands division suffered a 5.4 percent drop in earnings to AUD81.7 m. That division includes big brands like Wolf Blass, Lindemans, Squealing Pig, Pepperjack, Wynns, Seppelt and 19 Crimes.
The lower end of the market is really feeling the pinch. The company announced plans to shut its large production facility at Karadoc in Victoria in June next year. This facility makes lower end wine under labels such as Lindemans, Yellowglen and Wolf Blass,.
A recent report by Rabobank said Australia is suffering from a serious oversupply of wines, with an equivalent of 2.8 billion bottles of wine in storage enough for 4 years of supply.
It warns that even if the China wine tariffs are removed and exports resumed, it will still take Australia’s wine industry at least two years to work through this wine glut.
(the writer can be contacted at: info@thewinechronicle.com)
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