TWE shifts supply from China as demand decreases


Shortly after the announcement that Michael Clarke will take the position of CEO, Treasury Wine Estates has said that it will stop supplying a number of luxury wine lines to China due to a drop in consumer demand, and instead shift supply into other Asian markets.

TWE stated that austerity measures implemented by the Chinese government have impacted on the demand for premium wine including Penfold's Grange and Wolf Blass, The Mercury reports.

TWE recorded an 18 percent drop in the volume of wine sold in Asia due to China’s decrease in demand, a category decline in Singapore, and a change in Thailand’s alcohol tax.

Warwick Every-Burns, who is holding the position of CEO until Clarke takes over in March, said that while demand may be slowing in mainland China, other Asian markets are proving to be quite lucrative including that of Hong Kong and Japan.

"Some of the luxury wine that was previously used for gift giving has gone away, but there is still a very strong middle class and wealthy class of Chinese who want to drink luxury wines such as Penfolds Grange," he said.

“We are continuing to see strong demand for Penfolds across other key Asian markets, and TWE will optimise its flexibility by reallocating wine to markets in Asia to provide brands and profits optimisation," interim chief executive Warwick Every-Burns said.

"Let us not forget however that Asia is much more than simply a China story."

In addition to China’s decrease in demand, TWE is still yet to recover from a multi-million writedown of stock that was blamed on poor reporting systems. The company informed shareholders last year that it would be writing-off almost 600,000 cases of old wine, equating to a $34m loss, and a further $82.4m writedown on the value of bulk wine that was sold at fire sale prices.