By James Atkinson

Treasury Wine Estates (TWE) today announced it is working with its major US distribution partners to address their excess aged and deteriorating inventory.

TWE today said it expects to take a provision of $160 million (before tax) in the 2013 financial year to fund the initiative, which aims to ensure that "only the freshest and highest quality wines are available for brand conscious US consumers".

CEO David Dearie said the company has been operating at the higher end of its desired distributor inventory levels in the US.

"While TWE has been focussing on reducing days’ inventory organically, advances in logistics and warehousing, combined with a renewed focus on efficiency has resulted in US distributors significantly reducing their targeted inventory levels," he said.

"We remain committed to providing trusted and iconic brands for our loyal consumers, and this commitment has resulted in our decision to work with our partners to destroy old and out-of-date product in the US distribution network."

Dearie said excess inventory affecting TWE’s US supply chain has arisen as a result of three elements: over ambitious forecasting of new commercial product launches, improved distributor logistics, and old and out-of-date stock.

"TWE’s leadership team in the Americas believes old and obsolete product is limiting the company’s growth ambitions. As such, decisive action must be taken to address these barriers to growth, and I am confident that the steps we are taking support our long term growth agenda."

TWE said its 2013 earnings are expected to be in line with analysts’ consensus of $216 million, before material items including this provision.

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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