Treasury Wine Estates (TWE) has revealed its plans for growing its footprint in the United States – the world’s largest premium wine market.
It’s a tantalising proposition, as more than 4.4 billion bottles of wine were consumed in the US during the last year alone. America has the largest population of regular wine drinkers and the second largest volume of imported wine by value. In 2020, the US market consumed 101 million cases of imported grape wine valued at nearly $US14 billion. According to Wine Australia, US market value is expected to grow by US$2billion to US$35 billion by 2025.
TWE CEO Tim Ford addressed the American Chamber of Commerce in Melbourne today and admitted that while there’s “a lot of opportunity … there’s also a lot of competition”.
So, how does TWE plan to stand out in a crowded marketplace?
“Well, there’s the power of a certain celebrity called Snoop Dogg that helps,” Ford said.
He described the launch of Snoop Dogg’s 19 Crimes Cali Red last year as a “significant success” for TWE – it became the number one wine innovation for 2020 and the number 15 brand in the US wine market in a short period of time.
A brand extension, Cali Rosé, launched earlier this year and has, according to Ford, “outperformed expectations”, including being named the number one wine innovation for 2021.
“Understanding your market is one thing, but you also need to have the confidence to take measured risks – for us, that’s rethinking the wine space and pushing the boundaries to connect with new audiences,” he said.
Ford said 19 Crimes was the perfect example of how TWE had reinvigorated a wine brand to become an “international growth sensation”. The brand was first launched in 2011 and was initially an experiment to demystify the wine category and make wine more enjoyable for consumers, in particular younger consumers.
TWE was the first wine company to use Augmented Reality to bring labels to life in 2017. Its main channel for engagement continues to be through social media, where consumers can interact with 19 Crimes stories. Ford said 19 Crimes also brings TWE’s multi-region sourcing strategy to life, with grapes from California and Australia marketed globally.
“And of course, there’s the partnership with one of the most recognisable entertainment icons, Snoop Dogg, which catapulted 19 Crimes to worldwide fame,” Ford said.
“The launch of our Snoop partnership for Cali Red came at the right time and was a turning point in our relationship with US retail and distribution partners. During what was an extraordinary year, our courage in this idea and the fact we went ‘all in’ captured the imagination of our partners. As a result, we quickly gained distribution and display space that was unprecedented for a new wine launch.”
19 Crimes was a cultural hit, exceeding TWE’s initial 12-month sales forecast in the first two months of launch and
becoming the most successful wine launch of 2020. Ford said the partnership had inspired our consumers to think differently about wine (and also gave him “a bit of street cred at home with my kids with my new friend Snoop Dogg”).
Cali Red didn’t just sell bottles, it brought thousands of new US consumers into wine – 17% of consumers were new to the wine category and 77% of consumers were new to 19 Crimes.
The premium opportunity for TWE
Ford (above) noted that there are huge opportunities for Australian winemakers in the US – particularly as the premium wine segment is expected to grow 4% each year between now and 2025 despite the overall market being flat.
In F21, wine above $11 a bottle price point grew by 12% in the US retail channel and the above $20 price point grew 20% in the same period.
“So last year, we commenced a restructure of our US business and began divesting our commercial assets to make way for a wine business that will lead the premium wine category in the US,” he explained.
“Our focus portfolio continued to outperform the market in F21 growing 23% in value for the year led by Stags Leap, 19 Crimes, Penfolds, Beringer Bros, Matua, and St Hubert’s The Stag, a portfolio sourced from the US, Australia and New
He also pointed to the acquisition of Frank Family Vineyards, a longstanding family-run premium wine business in the Napa Valley, California.
“This is an exciting and complementary addition to our TWE Americas portfolio and provides us with a strong chardonnay led brand to build our business further through all luxury wine channels,” he said. “Which is key when considering the US is the largest market in the world for white wine, and Chardonnay.”
Ford concluded the presentation with his vision for the company’s future.
“Knowing our markets and being relentless in our quest to deliver for consumers will continue to be a central in our road to success, along with building relationships and creating a courageous culture,” he said.
“I truly believe that TWE has all the right ingredients to be the world’s most admired premium wine brand and our team are determined to see that happen.”