Penfolds owner Treasury rides China’s fine wine wave

Demand for fine wine in Asia has propelled Treasury Wine Estates, maker of Penfolds Grange, to a strong rise in sales and profits.

Asia was the second largest region for Treasury Wine Estates’ net sales in its last financial year, after growth there of nearly 37% to A$748.9m (£419m, US$507m), show the Australian winemaker’s results.

Demand for fine wine in China continued to drive growth and the ‘fundamentals’ of the Asian market remained strong, said Treasury, which recently announced the launch of its luxury Penfolds Collection for 2019.

Penfolds has a strong following in Asia, especially in China.

Treasury also announced a capital investment project worth up to A$180m to expand production at its Bilyara winery in South Australia to help it meet global demand for luxury and premium wines more generally. Bilyara is the home of Wolf Blass wines.

US vs China

The Americas, led by the US, is Treasury’s largest sales region and it generated A$1.13bn of company net sales in the year to the end of June.

That was up by nearly 18% versus the previous year, but the increase was 9.4% if currency gains are stripped out, showed results published by the group, which has Beringer and 19 Crimes brands in California.

Asia generated more profits than the Americas. Treasury said operating profits [EBITS] in Asia rose by 43%, to $293.5m, with the Americas up by 13% to A$218.7m.

Treasury’s account of the US market fitted with previous analysis from several observers; that demand for premium wines was rising but the lower value ‘commercial’ category was suffering.

Treasury said that it was well-placed in the market, four years after completing a programme to drain excess stocks of unsold wine in the US.

Elsewhere, the company said that the UK market remained challenging, but it also highlighted a trend towards premium wines there, too.

Total Treasury net sales rose by 16.6% for the year to the end of June, to A$2.83bn. The rise was 12.4% at constant currency rates. Net profits after tax rose by 16.4% to A$419.5m.


Read our review of the Penfolds Collection 2019 after a sneak preview tasting