TWE to accelerate Asia investment

17 Aug 2012, 2:46 pm   -   Source: AAP
Treasury Wine Estates says Asian markets are growing as demand for premium red wine increases. (AAP)

Treasury Wine Estates says Asian markets are growing as demand for premium red wine increases. (AAP)

Wine supplier Treasury Wine Estates says Asian markets, especially China, are growing as demand for premium red wine increases.

Wine supplier Treasury Wine Estates (TWE) says it will accelerate investment in Asia, with that market now accounting for about 20 per cent of the group's earnings.

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

TWE on Friday booked a net profit of $89.9 million for the 12 months to June 30, 2012.

There was no directly comparable profit figure for the prior year because at that time TWE was part of Foster's Group and was structured differently. TWE demerged from Foster's in May 2011.

But on a pro forma basis, TWE's earnings before material items totalled $210.2 million, up 7.7 per cent on a reported-currency basis and up 18.6 per cent on a constant-currency basis.

Shares in TWE were up 18 cents at $4.60 at 1305 AEST on Friday.

TWE chief executive David Dearie said that earnings on a constant-currency basis grew by 40.6 per cent in Asia in 2012.

"Over the year, TWE increased advertising and promotional investment in Asia by 45 per cent, and our plan is to increase investment in fiscal 2013 in order to position our brands for long-term sustainable growth," Mr Dearie said.

"Asia continues to be an exciting growth engine for our business, contributing approximately 20 per cent to TWE's earnings in fiscal 2012."

Mr Dearie said more people would be devoted to brand promotion in Asia, which would include wine tastings, wine shows, wine dinners and attending wine stores in an "ambassadorial" role.

"We're very excited about China .... there's a growing demand for red wine and brands. It's very important that brands have got history, and heritage and tradition," he said.

"We've got some brands with some wonderful rich history, and what we're doing now is showcasing those wines to the Asian consumer through these brand ambassadors."

Mr Dearie said TWE talked a lot about China, but the whole region was a very exciting market.

"There's about seven or eight really key countries for us in Asia," he said.

Mr Dearie said there had been good growth in markets in Japan and Singapore, for example.

TWE said it expected that earnings growth for the group on a constant-currency basis in 2013 would be below the average of the last two years, but would bounce back to above-average growth rates in fiscal 2014.

In 2013, there would be less premium wine available because of weather-affected vintages in 2011 in Australia and California, and it would cost more to make.

Furthermore, TWE expected higher IT expenses as it built its own IT system and planned to ship less wine to the United States - TWE's biggest market - in a move to reduce inventory levels.

Mr Dearie said the long-term fundamentals of the wine sector remained solid as consumer demand for better-quality wines continued to rise in many key markets, and globally, the supply of wine was moving towards balance with demand.

"Many would argue that we're already in a short-supply cycle," he said.

Mr Dearie said this was partly a result of the 2011 vintage being negatively affected by wet weather in Australia and California.

However, the 2012 vintage in Australia had experienced almost ideal growing conditions, which meant that TWE would have more premium red wine available to sell in future years.

  • Follow us: 
  • Follow us on Facebook
  • Follow us on Twitter
  • Follow us on Youtube