Treasury Wines China sales rebound but trade war casts doubt

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The uncertainty hanging over the company in China as the investigation plays out was a dampener on the buoyant sales in the September quarter, where depletions across the Asia business were up 14 per cent.

“Across Australia we have seen progressive and consistent recovery of demand month on month with depletions for the total Treasury Wine Estates brand portfolio growing 14 per cent in the first quarter versus the prior year,” Mr Ford said.

“In China specifically we have continued to see strong recovery in consumer demand for our brands,” he said. More banquet and large social gatherings had helped drive the rebound.

The Australian market was also on the rise again, with wine sales above $10 per bottle increasing solidly. The Treasury ”masstige” portfolio was up 21 per cent for the quarter.

The United States operations are also doing better. Treasury’s top nine brands were up 32 per cent in the first quarter. One of those brands is 19 Crimes where Treasury has a multi-year partnership with rapper Snoop Dogg helping to drive sales among non-traditional wine drinkers.

Mr Ford also said that work on a potential de-merger of Penfolds has been ”paused” because of the uncertainty caused by the anti-dumping investigation, the need to focus on a US wine division restructuring and the fallout from COVID-19.

An original timetable of making a decision by the end of calendar 2021 has now been ditched.

But the group is still pushing toward an internal separation of the Penfolds arm inside the company as a first step.

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Treasury is the biggest Australian wine exporter to China, and produces more than 40 per cent of Australia’s $1.26 billion in annual wine exports to that country.

Treasury said on Wednesday that it had been notified that the China Alcoholic Drinks Association in that country had lodged a written submission with the Chinese Government asking for retrospective tariffs to be applied to Australian wine imports of containers of two litres or less, as part of the anti-dumping investigation underway.

The China Alcoholic Drinks Association was the entity which initiated the original anti-dumping complaints to the Chinese Ministry of Commerce.

Separately, China is threatening to impose bans on up to $6 billion of key Australian exports from November 6 under a widely distributed notice sent to the country’s food and wine distributors, raising fears of a second wave of economic coercion. This is in addition to the uncertainty caused by the anti-dumping investigation by China, which triggered a big slide in Treasury shares in August.

The addition of copper ore and sugar to a growing list of commodities targeted by Chinese authorities alarmed the agricultural, mining, seafood and wine sectors in Australia on Tuesday.

Treasury Wine shares suffered big falls in August when the Chinese anti-dumping investigation first emerged.

Wine Australia figures released on October 28 showed Australia’s total wine exports rebounded in the three months to the end of September, driven by renewed demand from Britain and China. Exports accelerated by 23 per cent compared with the same period a year ago to $860 million.

The jump in exports in the September quarter came as Chinese demand for higher-end wines accelerated and retailers around the world restocked after some logistics disruptions caused by the COVID-19 pandemic. Chinese importers have urged Australian wine groups to get shipments of high-quality wine into the country quickly.