Penfolds beefs up French investment ahead of Penfolds Champagne launch

Treasury Wine Estates (TWE) has reported its strongest ever growth in organic net sales, as the Australian wine giant prepares to increase its investment in its French portfolio and launch a Penfolds Champagne.

TWE’s net sales revenue increased by 13% to AU$1.507 billion during the six months to 31 December 2108

Reporting its 2019 interim results for the six months ending December 31, TWE said net sales revenue increased by 13% on a constant currency basis to AU$1.507 billion, which represents the strongest organic growth rate in company history.

Its EBITS were AU$338.3 million, up 19%, with growth delivered across all regions.

With strong growth momentum, the wine giant also revealed that it will acquire winery resources in France that will “provide access to winery production facilities, access to quality vineyards and luxury bulk wines” for its expanding French wine portfolio, which includes its Maison de Grand Esprit label, and launch a previously announced Penfolds Champagne, 

In July of last year, Penfolds winemaker Peter Gago said he expected the Champagne to be released in 2019 in time for Penfolds’ 175th anniversary.

Additionally, there are also plans to introduce Beaulieu Vineyards wines made in France, which will be released this June.

The company also reaffirmed its commitment in expanding its market share in China, the company’s biggest market in Asia. 

TWE said it sees “tremendous opportunity” to continue growing its share of the imported wine market from the current sub 5% level by leveraging its brands and multiple country of origin portfolio, particularly from France, the biggest source for China’s imported wine. 

“We also see tremendous opportunity to expand our penetration into more cities and across more partners in China. We have an ambition to expand our presence and availability by more than 50% in the next three years,” said company CEO Michael Clark.

“The French category is one where the Company is particularly focussed on gaining share given it is the largest import category, accounting for around 30 to 40% of the market, and remains highly fragmented. TWE will aim to build on its existing French country of origin proposition, Maison de Grand Esprit, using the Penfolds and Beaulieu Vineyard brands,” the company explains. 

ASIA GROWTH

During the first half, Asia remained TWE’s biggest and most profitable market, with a 31% EBITS growth to AU$153.1m and an EBITS margin of 38.9%. NSR grew by 32% driven by increased availability of Luxury and Masstige wine and outstanding sales execution.

Americas reported 12% EBITS growth to AU$112.1m and an EBITS margin of 18.5%. NSR grew 20% through positive execution under the new route-to-market model combined with underlying premiumisation, offset by higher costs of doing business (CODB) reflecting a new sales organisation, and including transitional overhead investment carried above the line, not in material items.

Europe reported 10% EBITS growth to AU$26.3m and an EBITS margin of 15.0%. NSR growth of 10% was driven by Masstige-led premiumisation as well as continued focus on the strengthening of strategic customer partnerships.

Australia & New Zealand (ANZ) reported 13% EBITS growth to $77.4m, and an EBITS margin of 23.2%.

Commenting on the results, TWE’s chief executive officer, Michael Clarke, said: “I am very proud to see the foundation established in the previous years continuing to deliver sustainable growth, as shown by yet another strong set of financial results for the Group. Like in previous years, we’ve delivered on expectations while continuing to implement significant changes to the business and investing for future growth.”

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