NEWS
TWE TO HIKE PRICES IN JULY AS IT PROJECTS LONG TERM MARGINS OF 45% DRIVEN BY CHINESE MARKET
By Susan Lewis
27-6-2024
Source: Penfold's
Australia’s Treasury Wine Estates (TWE), owner of the Penfold’s brand, is projecting double digit profits growth with long term margins of 45 percent on its products’ popularity in the re-opened Chinese market.
TWE also announced a global price increase for Penfolds Bin and Icon wines, effective 1 July 2024, in response to ongoing strong demand.
In a recent update to investors, TWE CEO Tim Ford shared insights into the brand’s renewed momentum in the Chinese market, highlighting the enthusiastic reception of Penfolds’ luxury wines by local consumers.
He said the company’s earnings before interest, taxes and special items (EBITS) are projected to range between AUD418-421million (USD279-281m) in fiscal year 2024, driven by robust growth across all portfolio tiers.
The EBITS margin is expected to be around 42 percent, reflecting the re-establishment of entry-level Australian luxury tiers in China following tariff removal.
In fiscal year 2025, Penfolds anticipates low double-digit EBITS growth, fuelled by price increases and a modest rise in Bin and Icon portfolio shipments.
This growth will be partially offset by a AUD20m investment in brand building and overheads in China ahead of increased portfolio availability from 2026. The EBITS margin is expected to improve to 43-45 percent.
In fiscal years 2026 and 2027, Penfolds aims for annual EBITS growth of approximately 15 percent across both years, driven by the significant increase in Bin and Icon portfolio availability from the record 2024 vintage.
The EBITS margin is targeted to align with the long-term goal of 45 percent.
Tim Ford concluded by emphasising the exciting prospects for TWE and Penfolds in the post-tariff era: “This is an exciting time for TWE and the Penfolds business as we enter a post-tariff era as a stronger and more diversified global business, with all the necessary elements at our disposal to maximise the incredible long-term growth opportunities in China,” he said
“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. 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,” Ford added.
The company also announced a record 2024 Australian vintage, which will significantly increase the availability of Penfolds Bin and Icon wines starting in the second half of 2026. Ford attributed this success to a combination of factors, including an extensive grower network and strategic measures to ensure the production of luxury-grade fruit.
(the writer can be contacted at: info@thewinechronicle.com)
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