A new $100 million deal will see Treasury Wine Estates (ASX: TWE) license its US wine brands to California-based The Wine Group, giving the company room to focus on growing its premium brands in the Americas.
Under the long-term licensing agreement, The Wine Group will source and sell the California-produced Beringer Main & Vine, Beringer Founders' Estate, Coastal Estates and Meridian brands in the Americas.
All other Beringer branded products will remain with TWE, with the Melbourne-headquartered company stressing there is no intention to dispose of the brand any time soon.
TWE CEO Tim Ford says the deal will be of mutual long-term benefit to both organisations.
"For TWE, this transaction is a significant milestone toward our plans to deliver the future state premium US wine business and we can now focus solely on continuing the growth of our premium brand portfolio to drive future performance in the Americas," says Ford.
The brands being licenced generated $92 million of net sales revenue in the six month period to 31 December 2020, and $13.5 million of gross profit.
"The acquisition of these popular brands further positions The Wine Group as a global leader in wine," The Wine Group CEO Cate Hardy said.
"Adding these brands complements TWG's leadership in the value segment alongside our growing portfolio of premium wines, introducing more consumers to our high quality wines at every price point."
The deal is part of TWE's push to deliver a premium focussed business in the Americas, with a goal to generate at least $300 million in net cash inflow.
Today's announcement will generate proceeds of $100 million, putting the company on track to achieving that goal.
It comes after the company reported a 1H FY21 NPAT of $120.9 million, down 43 per cent on the prior year, thanks in part to pandemic related disruptions to sales channels for luxury wine in key markets and reduced shipments in China resulting from allegations Australian producers were dumping wine into the country.
In the US market, TWE saw earnings decline by 15 per cent in the half to $83.1 million, with performance disrupted by pandemic restrictions and the Californian wildfires.
However, the company said momentum in retail and e-commerce channels remained strong, with its premium brand portfolio still outperforming the US market.
Shares in TWE are up 3.11 per cent to $11.44 per share at 12.26pm AEDT.Never miss a news update, subscribe here. Follow us on LinkedIn, Instagram and Twitter.
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