Record Australian vintage buoys Penfolds amidst China re-entry, higher earnings

Record Australian vintage buoys Penfolds amidst China re-entry, higher earnings

Photo: Penfolds, via Facebook.

The company behind Penfolds wine is reporting an expected 14.6 per cent lift in earnings for the brand to at least $418 million in FY24, with further growth anticipated over the next 12 months buoyed by a record Australian vintage that coincides with a re-entry into the Chinese market following the removal of tariffs.

Treasury Wine Estates (ASX: TWE) CEO Tim Ford says it is fantastic to see local Chinese consumers reignite their interest in Penfolds' great Australian luxury wines, and a sense of renewed market momentum now that the China market has reopened.

"We are delighted to be bringing more of our Australian luxury wines back to China, at a time when the luxury wine market presents significant long-term growth opportunities for Penfolds and the wine category overall," Ford says.

"By leveraging our unique Penfolds brand status to drive ongoing demand, we remain steadfast on our clear ambition to be the number one luxury wine brand in the market."

Penfolds' earnings margins however are expected to decline by a couple of percentage points to 42 per cent in the current financial year due to the costs associated with going back into the Chinese market.

Low double-digit growth is forecast in FY25 due to price increases and an expected "modest" rise in the Bin and Icon portfolio, although topline growth will be partly offset brand building investment and overheads in China of approximately $20 million.

Treasury Wine Estates' enthusiasm for long-term growth opportunities in China has been aided by the delivery of a record 2024 Australian vintage, which is set to support a "significant step-up" in the availability of Penfolds Bin and Icon wines from the second half of FY26.

"The 2024 Australian vintage has delivered record intakes for key Bin and Icon portfolio wines as a result of a combination of factors, including our extensive grower network and TWE’s decisive measures taken to create the best opportunities to provide luxury grade fruit, which are clearly paying off," says Ford.

"Since 2018, TWE has invested $100 million in vineyard replanting and acquisitions to enhance long term production capacity, focusing on soil revitalization and vine redevelopment. 

"Additionally, from 2018-2022 we invested $180 million in TWE’s Barossa winemaking and packaging facilities to ensure world-class supply chain capabilities to cater for increased luxury wine production and availability."

Penfolds managing director Tom King adds that Penfolds unrivalled portfolio of globally sourced luxury wines continue to provide consumers from across China with access to wines from the world’s most revered wine regions including Australia, America, France and more recently China.

“The power of Penfolds to engage with consumers across four countries of origin is truly unique. Our most recent Penfolds China wine releases have provided excellent praise from wine critics and present an incredible opportunity to drive further connection and engagement with our consumers in China, and to become a global ambassador for Chinese luxury wine," he says.

“Similar to the roadmap we have followed in France, we continue to explore further winemaking opportunities in China, including investing in local sourcing and production opportunities to support future portfolio growth opportunities."

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