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China boosts Penfolds owner Treasury Wine Estates

www.decanter.com by Chris Mercer02/02/2018  

Selling more wines in China, and across Asia more generally, has helped to buoy Treasury Wine Estates in the first half of its financial year as it has cut down on less profitable parts of the markets in the UK and US - with global group profits also up strongly for the six months.

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Penfolds Grange has been in the top tier of Australia's Langton's Classification since the ranking was born in 1990. Credit: Penfolds

Treasury said today (31 January) that sales of wine rose by 44% in volume in Asia versus the same six months of the previous year, led by its Australian brands – which include Penfolds.

Volumes hit 2.4 million nine-litre cases for the six months to the end of December 2017.  Net sales for the region rose by nearly 37% to 218.1 million.

Sluggish volume sales at the lower end of the wine market in both the US and UK continued to prove a drag on Treasury’s overall results, with global volumes slightly down on the previous year and net sales broadly flat, at A$1.295bn.

Treasury said that it purposefully cut the flow of wine to lower price categories in the UK and US, which influenced the volume sales result – and, in the case of the US in particular, this strategy ‘masked’ growth for premium and luxury wines.

Still, higher profit margins helped Treasury’s global net profits after tax to rise by 37% to A$187 million.

The firm warned that operating profits momentum was expected to slow in the second half of its fiscal year – but that it still anticipated full-year results being in-line with consensus estimates from analysts.

Treasury’s results in Asia echo figures released by the Wine Australia trade body last week.

‘Exports to Northeast Asia were the growth driver with exports increasing by 47 per cent to over A$1 billion for the first time,’ Wine Australia said.

‘Fundamentals of [the] Asian wine market continue to be attractive, [with the] growing imported wine category taking share from [a] declining local wine category,’ said Treasury in its half-year statement.

Treasury began a distribution agreement in China with Baron Philippe de Rothschild in January 2018.

And the Australian group plans to fully open a new warehouse in Shanghai in October.