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Treasury Wine Estates to slim down branded portfolio

Published:  16 December, 2014

Treasury Wine Estates is focusing its investment on 15 global umbrella brands, 20 international brands, and 20 local brands, out of its 80-strong portfolio.

Treasury Wine Estates is focusing its investment on 15 global umbrella brands, 20 international brands, and 20 local brands, out of its 80-strong portfolio.

The group is then proposing to "retire" or sell off some of the remaining 25 commercial brands.

Michael ClarkeMichael ClarkeTreasury Wine Estates's chief executive joined the business in April 2014.

Chief executive Michael Clarke told the Annual General Meeting in Melbourne today: "We simply can't invest consumer marketing dollars effectively across 80 brands."

"The remaining non-priority commercial brands may be retired or might be addressed as part of a transaction or agreement with a third party," he said.

PenfoldsPenfolds has been identified as one of its 'global umbrella brands', says TWE.

Penfolds, Wynns, Beringer, Wolf Blass, Lindeman's, Etude, Chateau St Jean, Matua, Stags' Leap and Souverain were identified by Clarke as some of the brands that have the potential to become global umbrella brands. "These are brands that are flexible and can be scaled to grow globally; not just in one market or channel. This will accelerate top line growth - sustainably.

"While I don't believe it is truly global yet, Penfolds is an ideal example of a flexible and scalable model where grapes are not necessarily sourced from a single vineyard or appellation," Clarke said. He added that the group will be looking to source additional premium fruit in Australia for Penfolds and in the US for some of its other brands.

The group has committed to step up its consumer marketing budget by 50% in fiscal 2015.

TWE is performing well at the luxury and premium end of the market, and its intermediate brands - the so-called Masstige brands - are also doing well, Clarke maintained.

Clarke said the company had previously "underinvested in brands" becoming an "order-taker" which had increased the risk of earnings volatility. It plans to change this and will focus its efforts on the US and north Asia - namely China, Korea and Japan.

Clarke said: "The US wine market represents a significant growth opportunity for our company - it is in growth and it is premiumising. I have been very public on our commitment to the region. I believe that with the right portfolio mix, TWE can grow and win in the US."

Looking back at fiscal 2014, chairman Paul Rayner described the company's financial performance as "disappointing", but said the board was "taking the tough, but necessary, steps to drive improvements in the company's performance by tackling barriers to growth by making changes to TWE's structure, operating model and cost base".

In the past few years the company has been hit by sizable writedowns and impairments. Following a question, Rayner told shareholders: "I hope and think that the worst (of writedowns) is behind us. I'm not aware of any that are pending."

Treasury Wine Estates's new chief executive joins from British firm Premier Foods, and has experience across Kraft Foods and Coca-Cola.

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