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Treasury puts plans into action to cushion the China impact

Business

Treasury Wines, the owner of the Penfolds label, will attempt to cushion the blow from China’s tariffs by pivoting to other markets.

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The company said it had been informed that a deposit at a rate of 169 per cent would be applied to its wines that were in a container of two litres or less. The impost will stay in place until August next year at the least and were put in place by China after accusations of dumping.

China represented about 30 per cent of the company’s earnings.

In the past four months, total Asia earnings were about $75 million and within this Treasury had sold about 30 per cent of its planned 2021 China Penfolds allocations to customers. At the same time, China depletions across the business grew 35 per cent.

Treasury Wines said it had been developing a detailed response plan since the possibility of tariffs was first raised and would start that immediately. However, the impacts from that plan would be limited this financial year.

Treasury said it would shift its Penfolds Bin and Icon range from China to other key luxury markets where there was “unsatisfied demand”. These markets included other Asian countries, Australia, the US and Europe.

It would accelerate investments in sales and marketing across these markets and reallocate luxury grape source to other premium brands, including Wynns, Wolf Blass, Seppelt and Pepperjack.

It would also accelerate its multi-origin growth strategy, including sourcing wine from its existing base in France and even China.

Treasury said it would also start cost-cutting and reduce future vintage intake plans.

Chief executive Tim Ford said strong leadership from Government was needed to find a path forward.

He said there was no doubt China’s decision would have a significant impact on many businesses across the industry.

 

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