Issue link: http://winesandvines.uberflip.com/i/210765
DECEMBER NEWS Controversy Centers on Treasury Wine Estates St. Helena, Calif.—The firing of Treasury Wine Estates CEO David Dearie on Sept. 23 set off a storm of concern that stayed in the news until press time Nov. 15. Dearie's dismissal followed the announcement July 15 that the company was taking up to A$160 million in write-downs due to excess and outdated stock at U.S. distributors (1 Australian dollar [A$] equals 93 cents U.S.). Treasury Wine Estates is the Australian spin-off of Foster's Brewing Co. and includes Beringer Vineyards of Napa Valley as its largest North American holding. A class-action law firm in Australia is suing Treasury for allegedly breaching disclosure obligations over write-downs. Treasury denies wrongdoing. Earnings down 12.5% What went wrong? Wines & Vines spoke to four former executives from Beringer/Treasury's U.S. operations. They listed a number of problems: •Treasury divided the company by function rather than markets, isolating production from sales and marketing. • They drove down costs, leading to cheaper wine and packaging. The company acknowledges that its product portfolio is too low-end. • Heavy management turnover impacted the ability to set strategy and follow through. • The integration of Southcorp was very difficult, leading to four competing brands in the U.S. and poor distributor relations. The former executives agree that the pieces of TreaSales in the Americas for fiscal year 2013 were A$704 sury North America are probably worth more indimillion, down 1% from 2012. Total FY2013 sales vidually than as one, but if the company were to lose were nearly A$1.7 billion, with sales in the Americas Beringer, it would no longer be a significant player in representing 47% of the total. Earnings before interthe fast-growing market. est, taxes and an Australian accounting stand were A$67 million, down 12.5% from the year before. —Paul Franson In a report to shareholders, Treasury said that it inherited U.S. invenTreasury's North American Properties tory at the high end of the acceptable Production Case Avg. Price Vineyard range, improvements in warehousFacility Production Per Bottle Acres ing and logistics, lower than foreAsti Winery 250,000 $15 400 casted depletions and slower sales Beringer (includes Stone Cellars, added further inventory. Taz, Bohemian Highway 9 million $11 and Napa Valley Vineyards) At press time the shares were at Chateau St. Jean Winery & Vineyards 500,000 $14 136 A$4.82, down from A$6.43 on St. Clement Vineyards 25,000 $40 20 May 13. Etude Wines 30,000 $50 100 Treasury owns seven wineries Paso 360 & Cellar 360 and 25 vineyards encompassing 800,000 $10 3,600 (includes Meridian) 8,000 planted acres in California. Stags' Leap Winery 80,000 $50 90 By contrast, the Australian operaTreasury miscellaneous 6 million $6 tion has 10 wineries and 25 vineSource: Wines Vines Analytics yards covering 21,799 acres. tober rains punctuated a cool, wet growing season that caused widespread botrytis infection. "Botrytis developed in an exceptional manner in October in the western regions, the southwest, Burgundy, Beaujolais and Alsace, favored by frequent rainfall," the government agency said. The Organisation Internationale de la Vigne et du Vin (OIV) offered a higher estimate, pinning 2013 French wine production at 1.165 billion gallons. OIV reported that Spain will produce 1.057 billion gallons in 2013—a 23% increase and the country's highest wine production levels in at least five years—and Italy stood to regain the No. 1 wine producer title with 1.165 billion gallons of wine produced. New World countries The United States, the fourthlargest wine-producing country, fermented more than 752 million gallons of wine in 2012, an increase of 36 million gallons over the previous high set in 2005. To keep up with demand, U.S. wine companies have been im- porting bulk wine in recent years, particularly varieties from South America intended to fuel U.S. consumers' growing appetite for sweet wines. OIV estimated that Argentina's harvest was up 27% this year, and production in Chile grew 3.6%. The Winemakers' Federation of Australia estimated in June that the 2013 harvest was 2.02 million tons, an increase of 10% and the largest crop since 2008. Total bearing acreage was around 358,000 acres. Australia exports nearly 50% of its wine production. —Kate Lavin other top stories Direct-to-consumer sales reached $240 million in October, the highest level since the Wines & Vines/Ship Compliant model first started tracking the channel. (See all Wine Industry Metrics on page 10.) Wine shipments by U.S. mail might be in the future if a plan unveiled Oct. 30 by U.S. Sen. Charles Schumer of New York is adopted. It could generate an extra $225 million. The wine market is strong in China despite the government's crackdown on excessive gift giving by officials and business leaders (see page 23). A trade deal between the European Union and Canada, once ratified, could put extra pressure on Canadian producers to be more competitive (see page 17). Startups & Acquisitions Purchasing a 35-acre Anderson Valley Pinot Noir vineyard are Craig and Kathryn Walt Hall, owners of Walt Wines in Sonoma, Calif., and Hall Wines in St. Helena, Calif. Constellation Brands Canada quietly sold its shares in a joint venture with France's Groupe Taillan. A deal value wasn't disclosed as the acclaimed Osoyoos Larose venture of Osoyoos, B.C., became solely owned by Taillan. Bacchus Capital Management of San Francisco, Calif., formed BCM Wineworks Sales and Marketing Co. to represent Sbragia Family Vineyards, DeLille Cellars and Madrigal Vineyards. Latest NEWs More detail on the news at: winesandvines.com Win es & Vin es D EC EM B ER 20 13 15