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Penfolds’ first Cali wine twenty years in the making alongside TWE restructure

Published:  17 February, 2021

Penfolds has released its first ever Californian wine – a move that forms part of a major restructure of parent company Treasury Wine Estates’ (TWE) operating model which aims to rebalance its US operations and focus on new Penfolds launches outside of Australia.

The two flagship wines at the head of the collection are 2018 Quantum Bin 98 Cabernet Sauvignon and 2018 Bin 149 Cabernet Sauvignon. Both are made from predominantly Napa Valley Cabernet parcels with plantings taken from the brand’s South Australia home.

The new releases, which began over two decades ago, are being referred to as ‘Wine of the World’, having originated from a viticultural program in the 1980s to identify some of Australia’s most prized vineyards, propagate and replant in key global regions.

The wines form part of a revised look at TWE to restructure the company partly in relation to the introduction of China’s anti-dumping tariffs.

As of July, and announced in this morning’s half year results, the company will move from a regional model split into four regions EMEA, Asia, Australia & New Zealand, and the Americas, to a divisional model. 

These three new divisions will see Penfolds become a separate stand-alone entity (including Max’s and Koonunga Hill) in the TWE portfolio, alongside Treasury Premium Brands (Wolf Blass, 19 Crimes, Wynn’s) and Treasury Americas (Sterling, Beringer).

Previously, plans were in the works to de-merge Penfolds from the core business.

However, Treasury has since cancelled the plans, instead opting to pivot to its divisional operating model, while divesting some of its entry level US brands as it looks to increase international sales.

“The focus right now is purely on this new divisional operating model we’ve announced today,” CEO Tim Ford said. “That’s how we’re going to run the business for the foreseeable future, and we’ve stopped any work on demerger options.”

It is believed that trimming off some of the lower-end US brands will enable TWE to premiumise and potentially offset the costs of the Chinese tariffs announced at the end of last year.

The company has seen relatively robust results considering the impact of Covid.

For the first half of FY21 (July to December 2020), YOY profits slumped from $211.4m to $120.9m as the pandemic impacted sales of luxury wine worldwide – though there was some recovery compared to the previous half year results.

Penfolds’ new Californian wines hail from from the 2018 harvest, with the top wine priced at £545, mirroring Penfolds’ top Grange label.

This is the first time Penfolds will venture outside Australian soil to create a core range of wines.

The new California collection continues the Penfold’s “multi-regional winemaking style unrestricted by region or vineyard”, the company said, thus enabling the selection of grapes from “the world’s most premium winemaking regions”.

This includes winemaking opportunities in Bordeaux and Champagne, with TWE teasing that “all will be revealed in good time”.

Penfolds has an ongoing partnership with Champagne Thiénot, which started with the release of two Grand Cru Champagnes on 2019. However, further in-house launches are expected.

“The wines made in California pay respect to California terroir, yet one thing remains overtly consistent…the red Penfolds stamp,” chief winemaker, Peter Gago, said of the new collection. “AP John barrels, open fermenters and time-honoured Penfolds winemaking techniques have been applied. Being global isn’t just about selling wine around the world, it is about working with both feet on the soil. We will have the Californian sun above and soil beneath, but everything in between will be Penfolds.”