TWE has announced it will close its commercial winery in Mildura. The Karadoc wine-growing operation produces wine for brands such as Lindemans, 19 Crimes, Wolf Blass and Yellowglen.
The company said it intended to focus on growing its luxury and premium wine portfolios.
Chief supply officer Kerrin Petty said: “Making the decision to close a site is something we take very seriously and is a last resort after we’ve looked at all other possible options.
“Globally, the wine industry is seeing consumers shift away from commercial wine [less than $10 a bottle].
“Over the coming years, we expect commercial volumes at Karadoc to continue to decline and volumes to be at around 60 per cent of the capacity that the site is built to process. Given 70 per cent of costs at Karadoc are fixed, processing less volume means the cost of running the site is substantially higher.”
Zilzie Wines, Qualia and TWE’s Barossa winery in South Australia will take over production of the company’s commercial brands.
TWE will also sell its vineyards in Lake Cullulleraine, in Victoria’s northwest, and Yankabilly, in southwest NSW.
China to blame?
ABC News reports that Petty said one of the reasons the TWE winery doors would close was due to the ongoing wine trade tax situation between Australia and China.
“China is one of those reasons, where the door’s closed there, but then there’s different reasons in the United States and different reasons in Europe as well,” Petty said.
In February, CEO Tim Ford told analysts the company’s earnings from its operations in China were still “minimal to insignificant” following the imposition of punitive import taxes on Australian wine in late 2020.
TWE business review
Ford confirmed to The Australian Financial Review in May that a review of the business was under way.
“Like any business, we continually assess our structure and cost base to make sure we’re in the right position to continue to deliver on our strategy,” he said.
“We’re now at the halfway point of our five-year strategy and faced with changing consumer preferences and economic uncertainty in major markets, we’re reviewing the structure in our Treasury Premium Brands division, as well as some other parts of our business.”
TWE revealed in its 2023 half-year results that it had experienced softer consumption trends in the second quarter of 2023, relative to expectations, for entry-level premium wine in the US and UK, and commercial wine globally, contributing to volume declines for Treasury Americas and Treasury Premium Brands.
Growth also slowed for the 19 Crimes brand, with Snoop Dogg’s Cali Collection failing to generate expected sales.
Australian Vintage also announced this week that it was conducting a strategic review of its business.
It said the review may lead to potential third-party interest from domestic and international parties, in part or in whole, for the company.