Treasury Wine Estates has abandoned plans to sell off a raft of mainstream wine brands, including Blossom Hill and Wolf Blass.
The Australian wine giant announced in August that it was seeking divest the entirety of its “commercial” brand portfolio – comprising wines with a retail price below A$10 (£5.10) a bottle – to focus on posher tipples such as Squealing Pig, Penfolds and 19 Crimes.
However, it has now ruled out a sale, after offers received “did not represent compelling value”.
“Following the completion of its process to explore divestment of the commercial portfolio, TWE has concluded that the offers received for these brands did not represent compelling value and therefore their retention is the best course of action,” TWE said in its interim results today (13 February).
“Maintaining commercial brands strategically is not our plan,” said CEO Tim Ford. “However, we couldn’t get a financial outcome to sell those brands, so we’re responsible to make the decision to maintain them.
“They’re not going to be part of our growth [but] you may as well keep selling these brands.”
Blossom Hill and Wolf Blass are both among The Grocer’s Biggest Alcohol Brands in the UK off-trade, bringing in annual sales of £87.5m and £48.8m respectively [NIQ 52 w/e 21 April 2024]. Both, however, are in double-digit sales decline.
Other brands in TWE’s commercial division include Yellowglen and Lindeman’s.
The winemaker has sought to premiumise its portfolio in recent years amid a glut of Australian wine, and declining consumption globally.
Profits from TWE’s ‘Premium Brands’ division, which houses its commercial and premium labels, halved to A$22.9m in the six months to 31 December. Sales from the unit, meanwhile, fell by 4.9%.
This reflected “continued softness in consumer demand for wine at lower price points”, TWE said.
By contrast, posher brands like Penfolds and the recently acquired Californian vineyard Daou drove profitability. Earnings from Penfolds rose 33.9% to A$250.2m.
Bolstered by the removal of Chinese wine tariffs, meanwhile, TWE’s net profits (excluding exceptional items) climbed 32.5% to A$220.9m.
Owing to the poor showing from its cheaper labels, TWE said it now expected pre-tax profits of around A$780m for financial year ending in June, at the lower end of an earlier estimate of A$780m-A$810m.
Shares in TWE closed down 5.7% on Thursday (13 February).
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