Taylors Wines managing director Mitchell Taylor has hinted that the company is considering a bid for some of Treasury Wine Estates’ (TWE) well-known labels. In an interview last week, Taylor remarked, “We’ve got to do some due diligence on these things. We’re certainly having a good look at them,” signaling Taylors’ interest in the potential acquisition.
As part of efforts to streamline its operations, TWE’s chief executive Tim Ford announced in August that the company is looking to offload several brands, including Wolf Blass, Yellowglen, and Lindeman’s, all of which are part of its Premium Brands division. Despite the impending sale, TWE intends to retain other prominent labels in its portfolio, such as 19 Crimes, Pepperjack, Seppelt, and Squealing Pig.
According to TWE, the brands they are looking to sell contributed less than 5% to the company’s gross profit in the year leading up to July. The sale is seen as a strategic move as TWE continues to restructure its business.
Taylor’s Pursuit of TWE’s Labels Raises Questions
Taylors Wines, a family-owned business based in South Australia’s Clare Valley, has built a reputation for producing high-quality wines. The company was established in the late 1950s when the Taylor family joined the Clare Valley Co-operative and began bottling and distributing their wines under the Chateau Clare label. Over the decades, Taylors Wines has become a founding member of Australia’s First Families of Wines, a group dedicated to promoting premium Australian wine.
The news of Taylors’ interest in acquiring TWE’s labels raises eyebrows. As a producer of premium wines, why would Taylors look to own brands that operate in the more affordable, commodity end of the market?
Buying Low, Selling High?
Industry speculation suggests that Taylors could acquire these well-known international brands at a lower cost and subsequently reposition them in the market to improve margins. The financial landscape for Australian wineries has been difficult, with the sector losing an estimated AU$600 million (£310 million) in value in the wake of the COVID-19 pandemic and punitive tariff barriers imposed by China.
Some estimates suggest that TWE may only be able to sell the brands for around AU$100 million, given the limited number of potential buyers in the current market. This presents an opportunity for Taylors to acquire popular labels at a discounted price, with the potential to elevate their market positioning.
Treasury’s Shareholders Await Updates
Treasury Wine Estates will hold its annual meeting this week, where shareholders are expected to seek updates on the company’s restructuring efforts and the integration of Daou Vineyards, which was acquired for US$900 million just over a year ago. The purchase of Daou was seen as a strategic move to bolster TWE’s presence in the Americas and fill a key gap in its portfolio.
In addition to restructuring news, investors will be keen for details on TWE’s re-entry into the Chinese market. Prior to the COVID-19 pandemic, China was TWE’s largest overseas market. However, the company has adopted a cautious approach, stating that it would gradually redevelop its presence in the country due to ongoing concerns about demand.
Despite the lifting of tariffs, there are doubts about whether Chinese consumers are actively purchasing Australian wine. In the first three months following the tariff removal, Australian wineries exported more than $340 million worth of bottled wine to China. However, by July, monthly sales had dropped to just $38 million.
The key question remains: will Chinese consumers start buying these wines again, or has the market fundamentally shifted?
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