Treasury Wine Estates’ new chief executive Michael Clarke has clarified that he has no plans to sell the company’s troubled US wine business.
In his first presentation to analysts since taking the helm on March 31, Mr Clarke said yesterday he was considering all options to restructure the business.
Acknowledging that analysts had been clamouring for structural changes at TWE, Mr Clarke said he was “looking at and discussing with my colleagues all of these ideas”.
The statement appeared to be a reference to analysts’ repeated calls for TWE to sell its US division, which has been a drag on performance for more than a decade.
“I am looking at every single option that analysts have articulated in their reports … everything is on the table,” he said.
However, he later told The Australian that the US business was too important to give up.
“I think the US is a key part of our business going forward … given the time I’ve spent with the team in the US, we’ve created a very solid plan for next year and 2016 -- I think the US is a key platform for our growth agenda as we go forward,” he said. Mr Clarke took over from interim chief Warwick Every-Burns on March 31.
Mr Every-Burns, a non-executive director on the TWE board, was drafted in after the axing of former chief executive David Dearie in September last year over $160m in writedowns taken against the US division.
Mr Clarke said the company was still working through the excess inventory issues that had led to the US writedowns, where the company was now paying distributors to destroy excess stock of low-priced wines after failing to onsell them to retailers.
The US business had been hampered by a reduction in consumer marketing, he said, with the company focusing on rebates to retailers, resulting in a decline in demand and a downward spiral in prices.
“It’s not a good way to rebuild a luxury and masstige (TWE’s term for mass-market premium wines) brands -- you need trade spending to get on to the shelf, but you also need to get consumers engaged so they come into the store to buy your product,” he said. While the company’s strategy was already set for the rest of the financial year, Mr Clarke set out a three-point plan to improve performance in the new financial year.
This involved boosting consumer marketing, improving collaboration with retailers and distributors, and restructuring its cost base.Mr Clarke flagged a rationalisation of the company’s wine brands, saying the current tally of 83 was too many, and a number of brands were likely to be either sold off, licensed to third-party producers or simply warehoused.
Mr Clarke said he was committed to delivering on TWE’s earnings forecast for the current financial year, which was downgraded in January to predict earnings before interest, tax, depreciation and accounting adjustments for the value of vineyard assets of $190 million to $210m. This was down from previous forecasts for a result of between $230m and $250m.