A vintage performance from wine's new king

Building the brands and pushing into Asia has proven a winning strategy for Treasury Wine Estate's David Dearie. With just a few short-term difficulties to overcome, the winemaker is in for a corker of a decade.

David Dearie deserves a celebratory drink. A spicy shiraz perhaps? Or a zesty pinot? Whatever his palette, with Treasury Wine Estate’s move to focus on premium brands, he’s got a pretty tasty range to choose from.

Appointed managing director of Foster’s Group Australasian Wine division in 2009, Dearie became chief executive of TWE when it was spun off from Foster’s in mid-2011. A veteran of the business, Dearie had two decades of experience in the international drinks industry before he joined Foster’s.

He clearly had aspirations for the wine business, and he has shown he can deliver.

When TWE was demerged from Foster’s, Dearie’s strategy included two important aspects; build on its presence in Asia and improve the perception of the brand.

Today, investors waited with bated breath to see if the approach paid off. And they weren’t disappointed.

First off Asia. In 2012, TWE increased its brand building investment by 45 per cent. The result was that volumes across the region grew 20.6 per cent. China and Hong Kong fared even better, with a combined increase of 31 per cent in the year. The winemaker plans to build on this brand awareness through more expos, tastings and other publicity events throughout Asia.

The increase in volume in China is the real gem. With the rise of the middle class in the country, this market could potentially rocket in coming years. As Robert Gottliebsen has pointed out (Solving the China puzzle, August 17), Chinese consumers are set to become the largest middle class in the world. And Australia should be looking to take advantage of this shift. TWE has positioned itself well to capitalise on the growing demographic.

Alongside a focus on Asia, Dearie saw the need to build a premium brand. In 2012, net assets increased by $62.5 million due to more investment in producing luxury wine. Agricultural assets also increased as the winemaker invested more in its vineyards to build on luxury and 'masstige' brands.

Luxury brand Penfolds led the way, with net sales revenue rising 10.9 per cent in the year. Alongside this, the winemaker staged a successful relaunch of its Rosemount brand in Australia earlier in February, with depletions (the volume movement from a distributor to a retailer) to June 30 rising 14.4 per cent on the same period last year. Its Lindeman’s brand also grew, with depletions rising 7 per cent in the US, and fresh marketing of its Wolf Blass brand saw volume growth in the domestic market.

Dearie’s strategy of building the brand means that TWE is now in the best position to take advantage of the 2012 vintage, which it says should be high quality due to near-perfect weather conditions. Unfortunately, it will be 2014 before the winemaker sees the benefits of this vintage.

For now, Dearie needs to focus on steering the company through the short-term difficulties, including that it has a reduced amount of premium wines due to a poor 2011 vintage that resulted in below average volumes of wine. This of course means that the wines it has produced were made at a higher cost. To offset this, TWE would do best to spend the next year focused on capturing more of the Asian market.

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