Challenges ahead for Treasury Wine Estates

Treasury Wine Estates is struggling in the US and China, but new CEO Sam Fischer remains positive about the future of the company.

“We are currently experiencing category weakness in the US and China, two of our key growth markets, which will impact our business performance in the near-term,” he said in an investor update.

“Maintaining the strength of our brands and the health of their respective sales channels is of critical importance to our management team and our board as we navigate through the current environment.

“TWE is a high-quality business with strong foundations in place for sustainable, profitable growth.

“Our powerful portfolio of brands, leading market positions in attractive growth markets, unparalleled supply chain and highly engaged, capable team are all considerable strengths that position us strongly to deliver sustainable, profitable growth over the long term.”

TWE shares are currently trading at $4.89 – down from $11.28 on January 2.

The Australian has reported that the tumbling share price has put TWE back in the crosshairs of private equity.

“Buyout funds like companies with famous brands such as Treasury’s Penfolds, and some believe that they would be in a position to take a more ruthless approach towards stripping costs out of the business and boosting earnings,” reporter Bridget Carter wrote in the newspaper.

Fischer says he is energised by the opportunity to accelerate a transformation agenda to reshape TWE for its next era, leveraging these strong foundations.

“We have commenced work to identify opportunities to simplify the way we operate, to strengthen our execution focus right across the business and to realise significant cost benefits,” he says.

“I look forward to providing our investors with updates on our progress over coming months.”

TWE is committed to reducing customer inventory holdings in the US and China, to align with “moderated depletion growth expectations”.

The company will also significantly restrict shipments that are contributining to parallel import activity in China to protect the strength of the Penfolds brand.