Supplier says China wine market a bottler

17 Feb 2012, 4:40 pm   -   Source: AAP
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Wine supplier Treasury wines is targeting the Chinese market because of its standout growth.

Wine supplier Treasury Wine Estates (TWE) wants to produce more luxury wines and boost its presence in the fast-growing Chinese market.

TWE's brands include Penfolds, Wolf Blass, Lindeman's, Beringer and Rosemount.

TWE said on Friday that Asia, led by China, continued to be a standout growth area for the company, with the volume of wine sales up 36 per cent in China and earnings up 66.7 per cent for the region.

TWE chief executive David Dearie said TWE's luxury portfolio of labels under the Penfolds, Wolf Blass and Beringer brands had experienced volume increases of 41.2 per cent in China.

"We're very excited by China, but Asia in general has a very good, growing wine category, so we'll continue to invest in resources throughout the region," Mr Dearie said.

"We are currently increasing the size of our China-based team who will act as our brand ambassadors and educators and will greatly improve our brand-building activities."

TWE wanted to increase its production of luxury wines, a part of the market where demand outstripped supply.

Consequently, it was seeking new sources of grapes suitable for the production of luxury wines, in Australia, New Zealand and the United States, and the group would invest in vineyard redevelopment.

TWE said that the recent grape intake in California in the US had been lower than normal, but the upcoming Australian vintage was looking positive.

Grape prices in Australia and the US were showing an improving trend.

TWE said on Friday that its sales of wine by volume had fallen in the first half of the 2011/12 financial year and that net sales revenue was down as it had exited unprofitable segments of the market.

TWE said the fall in volumes in the first half was primarily a result of dropping unprofitable volumes in the United Kingdom.

But price increases and cost cuts had boosted earnings and margins.

TWE on Friday reported a 54.4 per cent jump in reported net profit for the first half of the 2011/12 financial year to $40 million, from $25.9 million in the prior corresponding period.

The higher value of the Australian dollar had reduced earnings by about $12.8 million from what it otherwise would have been.

The company said the reported figures were of little comparative value because the businesses that were part of TWE before and after its demerger from Foster's Group in May 2011 were different.

In the first half of the 2010/11 financial year, TWE was still part of Foster's.

TWE said that taking into account the changes, earnings on a reported currency basis had lifted 0.2 per cent to $91.7 million.

Volumes fell 6.2 per cent to 16.9 million nine-litre cases from 18 million nine-litre cases.

Mr Dearie said he was reasonably pleased that TWE had reported a "modest" 0.2 per cent lift in earnings despite subdued consumer confidence, reduced retailer inventory in Canada, an increasingly competitive retail environment and a strong Australian dollar.

TWE shares ended 17 cents, or 4.82 per cent higher, at $3.70.

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