‘Taking control’: Penfolds cracks down on Chinese grey market amid $1.1b loss

Penfolds maker, Treasury Wine Estates, cracked down on grey market imports in China and deliberately turned off the tap to global wholesalers to clear existing stock as the wine giant downsizes the business to target affluent drinkers.

Despite a 15.2 per cent fall in earnings from flagship brand Penfolds, chief executive Sam Fischer said demand for the luxury red wine brand remained strong in China after the company took “decisive action” to cut off Bin 407 shipments coming in from Southeast Asian countries, undercutting its official sales channel.

“It was having an impact on pricing. We weren’t getting the pricing that we wanted,” Fischer told analysts on a call on Thursday morning.

“To preserve the strength of the brand and make sure that positioning stays intact, [we said] we would take strong action and reduce shipments again to show everyone in the trade across the region how serious we are in relation to taking control of our route to market in China and in those parallel flows.

“We’re still finding areas of concern, and we’re taking strong action in relation to that.”

Treasury Wine’s sales fell 12.8 per cent across the whole business, driven by a 21.2 per cent slide in its Americas business – which includes brands like 19 Crimes, promoted by Snoop Dogg – currently undergoing an operational and strategic review.

The $3.8 billion wine giant booked nearly $1.1 billion in losses, attributed to US-based asset impairments, supply-chain restructuring costs, and write-downs of mid-tier and cheaper brands it is hoping to sell.

Commercial wine brands Wolf Blass, Lindemans, Yellowglen and Blossom Hill are back on the auction block as the company slashes its global portfolio from about 76 to less than 30 amid a broader decline in wine consumption around the world and as people drink less, but better-quality, wine.

Treasury Wine plans to cut $100 million in costs by fiscal 2029, leave US vineyards unplanted, and sell wineries and vineyards across California and Australia.

Investors appeared to welcome the full-year result, sending Treasury’s share price 4.4 per cent higher.

“Treasury Wines is still undergoing its destocking and rationalisation of its brand portfolio, which means that [fiscal 2027 estimated] earnings remain below potential,” stock analysts MST Marquee’s senior analyst Craig Woolford wrote in a note to clients.

More to come

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