By James Atkinson
Treasury Wine Estates has reaffirmed its intention to sell-off some of its brands that cannot be scaled up to fulfil larger volumes.
At the company’s AGM yesterday, CEO Mike Clarke said a 50 per cent increase in brand spend in FY15 would be focused on “flagship growth brands” including Penfolds, Wynns, Beringer, Wolf Blass, Lindeman’s, Etude, Chateau St Jean, Matua, Stags’ Leap and Souverain.
“These are brands that have the opportunity to become truly global brands,” he said.
“These are brands that are flexible and can be scaled to grow globally; not just in one market or channel.”
Clarke said Penfolds was an ideal example of a scalable brand that does not necessarily source grapes from a single vineyard or appellation.
“Rather, grapes are sourced from a basket of regions in Australia. Not only does this provide the brand with protection against weather-driven vineyard and vintage variation, the model enables Penfolds to be scalable,” he said.
Out of TWE’s portfolio of more than 80 brands, Clarke said there are around 15 “global umbrella brands” that have the potential to be scalable.
“To give you an example… Etude is a premium, Californian Pinot Noir proposition. The brand is not linked to a particular vineyard or appellation, rather, its provenance is varietal-based,” he said.
“We have already leveraged this brand by introducing a New Zealand-sourced Etude and consumers in Australia will see this outstanding Pinot Noir brand on shelf in the back half of this financial year. We also have plans to launch Etude in Asia and Europe.”
Clarke said investing in targeted global brands would then enable TWE’s next tier of around 20 international brands to slipstream behind the global portfolio in existing and new markets and channels.
“Looking further across our portfolio, we have around 20 ‘local brands’ which we will use tactically or offer as exclusives to our retail and distributor partners… We simply can’t invest consumer marketing dollars effectively across 80 brands,” he said.
“The remaining non-priority commercial brands may be retired or might be addressed as part of a transaction or agreement with a third party.”
Clarke said TWE’s performance over the first half of FY15 was running to plan and ahead of prior year.
“This is driven by changes in our Penfolds release dates but, importantly, it is also as a result of the actions we are taking to reset, fix and invest in our business in order to deliver future sustainable profit growth across all of our regions,” he said.