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14 W i n e s & V i n e s A P R i L 2 0 1 4 NAPA, CALIF.—Treasury Wine Estates made sig- nificant moves to address its poor financial per- formance, announcing the selection of a new CEO, a new VP of marketing for its Americas division and a new look for its Souverain label, among other moves. The publicly traded, Austra- lia-based company had little good news in its report to stockholders covering the first half of fiscal 2014, however, as earnings for the Americas division dipped 28% below a year ago, and dropped 38% for the company as a whole. Treasury Wine Estates (TWE) Americas owns seven wineries including iconic brands Beringer in Napa Valley and Chateau St. Jean and Souverain in Sonoma County, as well as 25 vineyards encompassing 8,000 planted acres. It employs 1,140 employ- ees. By contrast, the Australian operation has 10 wineries and 25 vineyards covering 21,799 acres. On Feb. 20 Treasury announced the appoint- ment of Michael Clarke as its new managing director and CEO, to fill the role left vacant in September, when the company dismissed David Dearie in the wake of an AUS$160 million write- down involving the destruction of 600,000 cases of out-dated inventory held by U.S. distributors. Clarke was most recently CEO of Premier Foods Plc, based in London. He joins TWE with more than 20 years of senior leadership experi- ence and a track record at some of the world's most-recognized consumer goods companies. He was to move from London to Melbourne, Aus- tralia, and start formally on March 31. Clarke ran the Kraft Foods European business and sat on Kraft's global operating board. At The Coca-Cola Co., where he spent more than 12 years, Clarke held a number of senior executive roles, including running the Northwest Europe & Nordics business unit. He also led Coca-Cola's South Pacific & Korea business unit for five years, during which time he was based in Sydney, Australia. In the TWE Americas unit, Barry Sheridan was promoted from within to be VP of marketing, replacing John Grant after four months on the job. A company memo stated that Sheridan had been instrumental in successful marketing strat- egies that grew Chateau St. Jean's sales and repositioned Etude as a Pinot Noir specialist using multiple AVAs. Sandra LeDrew remains chief commercial officer for the Americas. TWE's report for the first half of 2014 states a net profit after tax of AUS$106 million, down 43% from the first half of 2013, and earnings before interest, taxes and self-generating and regenerating assets (EBITS) of $45.8 million (exchange rate of AUS$1 = 90 cents U.S.). The company acknowledged this was significantly below the previous year and "reflects increased investment in marketing and distribution, chal- lenging conditions in Asia" and other factors. The Australian wine industry in general has struggled, not only in Asia but also in terms of exports to the United States. Sales of Australian brands dropped 5% in value in the 12 months through February, according to market research firm IRI, and dropped 6% in volume. At press time the company's stock was trading at AUS$3.75. Its highest point in the past year was AUS$6.47, reached in May 2013. As for the Americas division, shipments were down by 13%, largely due to the "inventory realignment" in the United States. Volume and value also decreased in U.S. Nielsen data, coun- ter to the overall off-premise growth trend in wine sales. A 14% increase in net sales revenue per case was one bright spot for the Americas and reflects, according to the company, "volume growth in Canada and improved portfolio mix across the region." It cited Nielsen data that Beringer Clas- sics' volume was up 7% in the first half of fiscal 2014, and that Lindeman's volume in the Ameri- cas was up 1%. TWE uses the term "masstige" to describe its mass-produced, higher priced wines such as Cha- teau St. Jean, Matua, Gabbiano and Sledgehammer. It reported that TWE masstige wines outper- formed the category. Treasury Wine Estates traces its roots back to the establish- ment of Penfolds in South Aus- tralia in the mid-1840s. Foster's brewing began to build its wine division from 1995 and built the division into one of the worlds largest wine producers. In 2005 it acquired the Australian winemaking group Southcorp, add- ing Penfolds, Lindemans and Rosemount and around AUS$1 billion in revenues. Texas Pacific Group brought Beringer and other properties in its portfolio for $350 million in 1996. TPG sold Beringer to Fosters in 2000 for a reported $1.5 billion. It was originally called Beringer Blass. —JIm GordoN, wIth PAuL FrANsoN treasury Appoints CEo as Earnings drop wine Industry metrics Source: IRI, ShipCompliant, winejobs.com, Wines Vines Analytics off-Premise sales Month 12 Months Feb. 2014 $590M $7,424M Feb. 2013 $549M $6,939M direct-to-Consumer shipments Month 12 Months Feb. 2014 $126M $1,598M Feb. 2013 $113M $1,489M winery Job Index Month 12 Months Feb. 2014 219 206 Feb. 2013 181 161 +7% +7% +12% +7% +21% +28% treasury wine Estates Americas First half 2014 results Aus$1.00 = us$0.90 1st half 2013 1st half 2014 Change shipments from wineries (9L cases M) 8.1 7.1 -12.7% depeletions from distributors (9L cases M) 7.8 7.6 -2.3% Net sales revenue (AUS$M) $363.1 $361.8 -0.4% Net sales revenue per case (AUS$) $44.84 $51.19 14.2% Earnings EBIts (AUS$M) $34.1 $24.6M -27.9% Earnings margin EBIts 9.4% 6.8% -2.6% EBITS=Earnings before interest, tax and self-generating and regenerating assets. A P R I L N E W S Top Stories The month in perspective A P R I L N E W S 1. treasury Earnings drop 2. Eastern wine Growth 3. drought Continues 4. other top stories