What respectable wine connoisseur doesn’t know and love Australian-made Penfolds Grange? My bet is not many.
What they probably don’t know is the Penfolds wine producer is part of Treasury Wine Estates (TWE), a global winemaking and distribution business headquartered in Melbourne.
Today, Penfold’s parent company is up just under two and a half percent, at 2.496%. TWE shares are up 44 cents to $18.10 apiece.
So why did this happen to TWE shares?
CEO Michael Clarke is working to expand the company’s influence — and he’s looking to the US for ideas.
In recent days it was announced the company will use grapes from California’s famous Napa Valley. California-sourced wines will be sold by 2022.
Detractors say this multi-sourcing of fruit and winemaking will hurt Penfolds’ brand…but that’s not how chief winemaker Peter Gago sees it:
‘The Penfolds winemaking team is delighted to engage in a profound expansion of our core range, while preserving Penfolds DNA and at the same time, building upon the creativity, ingenuity and boldness of our winemaking ancestry.’
He’s citing Penfolds’ California heritage, of course. The original vine cuttings were sourced from the US’ west coast, and since then there have been further exchanges.
Clearly, the market agrees with Gago if today’s rise is any indication…
Still, there is some risk involved when moving to become a global brand.
What’s next for Treasury Wine Estates?
It seems the company is continuing down this path, with Clarke saying:
‘Innovation of this nature plays a critical role in driving long term, sustainable growth for the company as we broaden brand appeal and offerings to consumers around the world.’
From a financial point of view, the move is sound. Extending the Penfolds’ brand to include Californian label wine will increase both the amount and range of Penfolds products (some of the most profitable wines under Treasury).
Clarke’s main gamble is pushing too far from home. If the brand shifts monumentally the company may lose buyers who loved the company’s Australian appeal.
Anyway, so far so good. The announcement clearly turned heads, in a good way. But keep up to date here, with us, for the latest news on the changing wine landscape.
For Money Morning