Treasury looks to Pepperjack for US market foothold

Treasury Wine Estates, owner of iconic brands such as Penfolds, Wolf Blass and Lindeman's, will ship 10,000 cases of its red wine powerhouse brand Pepperjack to the US as it chases a greater slice of the premium wine category in the crucial offshore market.

Treasury Wine Estates, owner of iconic brands such as Penfolds, Wolf Blass and Lindeman's, will ship 10,000 cases of its red wine powerhouse brand Pepperjack to the US as it chases a greater slice of the premium wine category in the crucial offshore market.

Playing up the prestigious values of the South Australian Barossa region, Treasury will concentrate its fresh assault on the US premium market around the 2012 Barossa Red Pepperjack label, a variety expected to appeal to American drinkers.

The premium and super-premium wine segment has been growing strongly in the US, as well as in other international markets, against a flat to negative sales trajectory for the cheaper end of the price scale.

In fiscal 2013, pre-tax earnings in the Americas for Treasury Wine Estates fell 14.5 per cent to $66.8 million. But the performance of its luxury wines was more positive, with price increases pushed through on the back of supply constraints for premium labels helping to lift net sales revenue per case by 0.6 per cent.

Treasury Wine Estates, the world's largest pure-play winemaker, was recently forced to trigger a $160 million write-down associated with its troubled US wine operation, which included the destruction of about $35 million worth of lower-priced wine stocks left unloved in US warehouses.

At the time, Treasury chief executive David Dearie said "winning in the Americas is a top strategic priority". He was dumped last month, on the back of the purge of its US wine stock, with the company expected to appoint a new boss soon.

Treasury Wine Estates is pushing ahead with its attempts to turn around its US business, helped by the release of more premium wines into the region in the midst of tight supply conditions. This is expected to flow through to improved revenues and earnings.

According to Nielsen research, luxury red blends priced at $US20-$US25 ($21-$26) have grown by 39 per cent in value as a category in the US market recently.

The initial shipment of 10,000 cases of Pepperjack is expected to cross local markets and suppliers, with a launch on November 1. Pepperjack in the US is likely to have a retail price of about $US23.99, and an on-premises, by-the-glass price of $US13. Pepperjack has been popular in Australia, where it has been the No.1 red wine by value for the past 34 months, industry statistics show.

The Pepperjack destined for the US is a blend of eight varieties and was matured in French and American oak for 12 months.

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