Treasury Wine Sees China as World’s Largest Market in 10 Years
Chinese wine sales will rise to about 500 million cases a year in a decade, from 150 million cases at present, Chief Executive Officer David Dearie said in an interview in Beijing today, citing company estimates. That will put China ahead of the U.S., which will sell about 450 million cases, he said.
Treasury, whose brands include Penfolds and Rosemount, is hoping to boost sales to about 60 cities in China within five years from less than 16 at present as it tries to capitalize in Asia, its fastest-growing and highest-margin market. Revenue at the Melbourne-based company’s Asian unit rose about 10 percent for the six months ended December from a year earlier, according to data compiled by Bloomberg.
“Where the track record has been in terms of growth for the last two or three years has definitely been in Asia,” Paul Rayner, Treasury’s Chairman, said in the interview. “There’s a huge opportunity for us to take market share with premium wines.”
The Melbourne-based company’s board is visiting China.
Treasury has gained 46 percent in the past 12 months on speculation a long-term global glut in wine will turn to a deficit because of growing demand, bad harvests and as some producers cut output. The stock closed 0.7 percent lower at A$6.05 in Sydney trading today.
Treasury hasn’t been affected by a frugality drive by the government of President Xi Jinping even though about 40 percent of purchases are for business occasions, Dearie said.
“The challenge we have now is we just don’t have enough supply to satisfy demand,” he said.
Treasury’s focus in China is to sell premium mass market wines to consumers between the ages of 20 and 45 with annual disposable income of 150,000 to 200,000 yuan ($24,100 to $32,100) a year, Dearie said.
“We see Asia contributing nearly A$200 million ($208 million)” to Treasury’s earnings before interest and tax by 2016, David Errington, an analyst at Bank of America Corp.’s Merrill Lynch unit, wrote in a note to clients March 19.
Treasury’s 2008 Penfolds Grange Shiraz received a “perfect” 100-point score from Robert Parker’s Wine Advocate review. The vintage will also get a boost in sales in Asia because it was the same year as the Beijing Olympics and the number eight is considered lucky in China, Errington wrote.
Asia is Treasury’s smallest market by volumes, with sales of 600,000 12-bottle cases in the six months ended December. Earnings before interest, tax, and adjustments for the value of the company’s vineyards were about A$13.5 million in Asia, compared to A$5.9 million in Europe where the company sold 3.4 million cases.
Treasury added 25 staff in the country in the past year, bringing the total to 40, Dearie said.
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