Bloomberg News

Treasury Wine Readies China Gifts Modeled on $168,000 Ampul

March 01, 2013

Treasury Wine Estates Ltd. (TWE), Australia’s largest winemaker, plans to boost Chinese gift sales with trophy products similar to its $168,000 bottle of 2004 Penfolds Cabernet Sauvignon released last year.

The Cabernet, contained in a glass ampul mounted inside a wooden cabinet, is “the sort of gifting that we really want to go out there” in Asia, David Dearie, chief executive officer, said in an interview yesterday. Treasury rose to a record today in Sydney trading.

The company spent several hundred thousand dollars last year researching China’s wine-buyers, said Dearie. Treasury is using its findings to tailor products to Chinese consumers after success targeting Hispanic drinkers with Beringer’s Los Hermanos label in the U.S., he said.

Treasury expects a “very big second half” from March and May releases of its Penfolds brand.

The winemaker gained 4 percent to A$5.51 as of the close of trading in Sydney, the highest since the company was spun out of Foster’s Group Ltd. in May 2011. The S&P/ASX 200 Index fell 0.4 percent.

The company yesterday reported first-half profit of A$52 million ($53 million), beating analyst estimates.

Treasury is developing alternative packaging for wine given as gifts in China and using marketing developed for Asia, where profit margin was double that in other regions in the six months ended Dec. 31, Dearie said.

Asian sales had a 30 percent margin on earnings before interest, tax, and adjustments for the value of vineyards, the Melbourne-based winemaker said yesterday.

“There’s so much rich pickings in wine if we just get creative,” Dearie said by phone. “We’ve been a little bit lazy as an industry.”

Extravagant Spending

A crackdown on extravagant spending by officials as part of incoming President Xi Jinping’s austerity drive in China wasn’t slowing sales into the country, Dearie told an investor call yesterday.

Treasury was inspired by the success of the Los Hermanos range, marketed by its U.S. label Beringer to Hispanic consumers, and the limited-edition $168,000 bottle, Dearie said.

Sales volumes to China and Hong Kong rose 24 percent in the first half, and the company expects total market demand to increase from between 120 million and 130 million nine-liter cases at present to 250 million to 500 million in five years, Dearie said.

To contact the reporter on this story: David Fickling in Sydney at dfickling@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net


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