Penfolds to set minimum price

Treasury Wine Estates is to set a minimum release price for Penfolds Grange next year and plans to increase production long term.

David Dearie, the new CEO of the company, which was separated from the Foster’s Group in May, told the drinks business that he wanted to put an end to inconsistent pricing for the iconic Australian wine and improve the supply for emerging markets.

Speaking of last year’s releases, he said: “We could have sold almost every bottle of high-end Penfolds and Lindeman’s in Asia alone,” adding: “We didn’t make enough.”

Hence Dearie has been working on “reallocating our luxury wines” and, for the future, “looking at meeting the demand.”

This, he cautioned, won’t involve “massively ramping up production, but making some more to get closer to satisfying the demand”.

Referring to Penfolds “Luxury and Icon Range” specifically, which includes Grange, he said: “We are likely to invest in more contracts, more land, more oak and storage facilities, so we can make a slow but steady increase in the availability of those wines”.

While he acknowledged that the limited supply of these fine wines is part of their appeal, he explained: “I don’t want them to be so scarce that I disappoint people.”

He is also setting a minimum release price for the 2012 allocation. “We realised our internal pricing was all over the place which meant the retailing price was all over the place,” he commented.

“Next year we will set a minimum price and you must hit that minimum price or you won’t get an allocation,” he said, referring to Treasury Wine Estate’s internal allocation and pricing strategy.

“We have been carrying out due diligence to ensure that retailers across globe are paying the same price for Penfolds whatever their geographical location,” he added.

“This will mean a significant price increase in some markets, and this may free up some wines to sell in those markets with better returns… we have got to optimise profitability”.

The next five vintages of Penfolds Grange have already been made and production for the label is estimated to average 9,000 cases.