Penfolds to go it alone as a luxury wine brand

Treasury Wine Estates, owner of luxury winery Penfolds, is considering a split of its business to allow greater focus on its premium wines.

The company announced the results of a strategic review of its operations and said it would pursue an option of splitting its more commercial brands into a new publicly traded company, currently known as New TWE.

Penfolds accounts for 10 percent of Penfolds sales but accounts for 50 percent of profits, with its iconic Grange widely regarded as one of the best wines in the world.

In the event of a separation, Penfolds would retain the luxury wines in the company’s portfolio from Australia, Europe and the United States.

The new TWE would contain the company’s more commercial wines, which would be rationalized, and would also pursue a strategy of premiumization and increased margins.

Tim Ford, COO of TWE, said: “These initiatives will accelerate the separate focus on luxury and commercial portfolios, and will be implemented… to maximize potential gains on asset sales, minimize associated one-time cost impacts and minimize disruption to business performance.

Penfolds owns many brands, including Australian brands Lindemans, Wolf Blass, Seppelt, Wynns Coonawarra, Pepperjack, Rawson’s Retreat and Rosemount Estate.

In the United States, it has a similar range led by the Beringer brand.

With so many commercial wine brands within the company competing for similar markets, divesting the underperforming will be a priority.

Once the split is complete, TWE will remain in the top 50 companies in ASX, while New TWE will feature in the top 150.

President Paul Rayner said: “New TWE would remain the world’s largest globally integrated wine platform… (while) Penfolds is an Australian luxury icon.

TWE shares closed last night at $ 10.61, valuing the company at $ 6.7 billion

Image: TWE

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Jean H. Vannatta

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