Treasury cites ‘deep discounting’ break for sales drop

Treasury Wine Estates, the wine division of brewing giant Foster's, has reported a fall in sales volumes in its first year as a standalone operation.

Treasury, owners of Penfolds, report sales drop

One of the reasons could be the break with heavy promotional offers and deep discounting, Treasury Wine Estates‘

CEO said.

Sales at the newly-formed company, owners of brands including Penfolds, Stags’ Leap and Wolf Blass, have dropped by more than 6% in the first half of this year.

While the company’s brands performed well in Australasia and Asia, the strength of the Australian dollar against the British pound and US dollar affected sales.

Exchange rate movements were also blamed for reducing its earnings before tax (EBIT) by as much as AUS$30m (£19.6m).

TWE’s CEO David Dearie said market conditions in the Americas, and Europe, the Middle East and Asia had proved ‘challenging’, and the situation was exacerbated by the ‘ongoing strength of the Australian dollar’.

‘In the Americas, strong first half earnings made way for a softer second half as the economic outlook became increasingly uncertain, and competitors discounted aggressively in the face of weakening consumer confidence.’

Treasury suggested its decision to reduce promotional activity and deep discounting unlike its competitors had led to a fall in sales.

Foster’s has announced it has accepted a AUS$10bn (£6.53bn) takeover offer from SAB Miller, the world’s second largest brewer, ending months of public wrangling between the two companies.

Foster’s decision to demerge its wine division was widely seen as a signal of its intention to sell its beer business.

Written by Rebecca Gibb