AMP is chopping itself up and selling off the bits and yesterday Treasury Wine Estates (TWE) revealed its version of the same idea with the first major deal to reposition itself after being locked out of the Chinese market last year.
AMP is slimming down and has sold off stakes in its huge life insurance business and in AMP Capital – its key funds management arm, and a small part of that business was sold on Tuesday.
Yesterday TWE revealed its first major move – the licensing of $100 million worth of its US brands to major US wine producer The Wine Group.
This deal is part of an ambitious plan to generate $300 million from these sorts of deals.
The move is a major step in TWE’s to lift its game in the huge but (for TWE) unrewarding US market.
Improvement in the US is a key part of the post-China revamp of the company which is Australia’s biggest winemaker and exporter.
Treasury told investors on Wednesday it had struck a deal with The Wine Group, which is the world’s second-largest wine producer, which will see it license Treasury’s Beringer Main & Vine, Beringer Founders’ Estate, Coastal Estates and Meridian brands in the Americas.
TWE said on Wednesday that “The Beringer brand will be licenced to The Wine Group for use on Main & Vine and Founders’ Estate ranges only.”
“All other Beringer branded products will remain with TWE. Beringer remains a core brand within the TWE portfolio and there is no intention for TWE to dispose of the Beringer brand as part of this or any future transactions.
“In the six-month period to 31 December 2020, these brands contributed 2.3m cases of volume, $92 million of net sales revenue (NSR) and $13.5m of gross profit.”
The company’s US deal is part of what TWE says is the “premiumisation” of Treasury’s American sales – it wants to concentrate on more expensive higher margined brands (such as Penfolds which has been the main victim from the Chinese move to impose penalty tariffs).
The brands licensed in Wednesday’s statement are part of TWE commercial-tier portfolio – ie mid margin, mid quality wines that are sold through major retail or distribution channels.
“We are delighted to be entering into this long-term transaction with The Wine Group, which will be of mutual long-term benefit to our respective organisations,” TWE CEO Tim Ford said.
“For TWE, this transaction is a significant milestone towards our plans to deliver the future state premium US wine business and we can now focus solely on continuing the growth of our premium brand portfolio to drive future performance in the Americas.”
There was media speculation earlier this week that the French drinks giant Pernod Ricard could be looking a bid for TWE.
UK media reports claimed Pernod could be interested in all or part of Treasury.
Pernod Ricard is already one of the biggest wine producers and exporters from Australia with its growing Jacobs Creek range. St Hugo is a premium brand while Brancott Estates and Stoneleigh are NZ brands.
TWE shares jumped nearly 10% on Monday reaching $11.17 on Monday.
The shares rose 2.8% on Wednesday after the release to end at $11.42. That was in a market down 0.7%.
