Winemaker Treasury Wine Estates will undertake a major overhaul of its distribution network in the key US market in a bid to get even better performance from its operations there.
As TWE announced a 37 per cent lift in first-half profits, chief executive Michael Clarke said Treasury will overhaul its distribution and sales network in the US to tailor operations for that market, mirroring the group’s approach elsewhere.
“I’ve not been happy with our performance in the United States – there’s an opportunity to continually improve,” Mr Clarke told AAP on Wednesday.
“Our numbers have been good, but I know we can do better.”
Mr Clarke said that in US states such as California and Washington, where TWE can sell direct to retailers, it would do so.
In some other states, TWE will work through strong regional distributors instead of national distributors, whom Mr Clarke hopes will be hungry to grow alongside TWE.
Mr Clarke said TWE had already changed its distribution models elsewhere, now going direct to retailers in China, but using a distributor in Canada and both approaches had delivered results.
“The model differs by market, and it’s not change for change’s sake,” he said.
While there was executional risk associated with the changes, which will happen over the next six months to a year, Mr Clarke said if it went well the benefits to TWE’s US operations could match improvements won from changes made in China by the back end of 2018/19.
TWE, whose brands include Penfolds, Wolf Blass, Beringer, Blossom Hill, and Maison De Grand Esprit, on Wednesday reported a 37.4 per cent lift in first-half profit to $187.2 million as the group completed the integration of its Diageo acquisitions and cut supply chain costs.
The group, which brought its results announcement forward by two weeks to coincide with the US restructure announcement, generated growth in earnings and margins in the Americas, Asia, Europe and Australia and New Zealand.
Asia again generated strong growth as Chinese consumers bought more of TWE’s Australian, US and French wines on key gift-giving occasions such as the mid-Autumn festival, Singles Day and Christmas.
Treasury expects to meet analysts’ full-year earnings forecasts of $524 million, and anticipates earnings growth of 25 per cent in 2018/19, driven by the business model changes and increased availability of high-end wine.
TWE cut its exposure to the less profitable commercial wine market by about one million cases in the first half – and expects to trim it by about the same amount in the subsequent six months.
Citi analyst Craig Woolford said Treasury Wine’s first-half result was very strong, but analysts were likely to make limited upgrades to forecasts partly because of potential risks around the large-scale distribution changes in the US.
Shares in Treasury Wine closed 12 cents, or 0.7 per cent, higher at $17.12 on Wednesday.
TREASURY HEADING HIGHER
* Net profit up 37.4pct to $187.2m
* Revenue down 2.3pct to $1.336.6b
* Interim dividend up 2.0 cents to 15.0 cents, 75 per cent franked