Treasury to destroy $35m of ‘old’ US stock

Treasury Wine Estates is to destroy A$35 million (£21.4m) of “old and aged commercial stock” in the US as a reaction to declining sales in this market.

The Australian company, which owns brands including Penfolds, Beringer, Lindeman’s, Wolf Blass and Wynns Coonawarra Estate, expects shipments to the US to fall by up to 2m cases in its 2014 financial year. In 2012 the group shipped 15.7m cases to this market.

In addition to the destruction of old stock, TWE has earmarked a further AU$40m for discounts, designed to “further accelerate the sale of excess current vintage wines in the US distribution network.”

As a result of the reduction in US shipments, TWE expects to bear further costs of A$85m in 2013 from carrying excess bulk and finished wine, as well as “some onerous grape contracts.”

David Dearie, chief executive of TWE, attributed the excess stock to three elements: “over-ambitious forecasting of new commercial product launches, improved distributor logistics, and old and out-of-date stock which both TWE and our distribution partners would prefer to destroy.”

Arguing that “old and obsolete product is limiting the company’s growth ambitions,” Dearie concluded: “As such, decisive action must be taken to address these barriers to growth, and I am confident that the steps we are taking support our long term growth agenda”.