Treasury Wine Estates (TWE) has announced that, as of 1 July, it will raise the prices of the top tiers of its Penfolds range due to current demand exceeding supply. The price hike is expected to apply to Penfolds Bin’s 389, 407 and 128 along with other top-tier labels.
The news, which was shared directly with the Australian Financial Review, follows closely behind the 28 March China’s Ministry of Commerce (MOFCOM) announcement concerning the immediate removal of China’s tariffs on Australian wine imports.
“The Penfolds brand is still prominent in China, with the company opting to keep 120 staff in the country even after Beijing slapped 175 per cent tariffs on its Australian exports,” said the Australian Financial Review.
The price increase will apply to all Penfolds markets globally and will likely fall around 5-7%.
“Penfolds will retain its standardised global pricing structure in order to ensure long-term brand health and price integrity,” it said.
Despite the lifting of tariffs, TWE indicated in its February FY24 interim results that it is only anticipating small earnings contributions from its China sales for the remainder of F24. Profits are expected to develop momentum by F27 following incorporation of the Bin and Icon availability expansion currently in process.
“This is a medium-term growth opportunity that we will pursue in a deliberate and sustainable manner, focused on growing our portfolio in China while continuing the strong momentum that we have delivered in several global markets over recent years,” said TWE’s Chief Executive Officer Tim Ford.
“Since the tariffs were introduced three and a half years ago, our commitment to China has been resolute, and we now look forward to partnering with our local customers to re-establish our Australian COO portfolio in the market while continuing to be a meaningful contributor to the development and growth of the Chinese wine industry.”
TWE’s complete plan for Penfolds’ reintroduction into the Chinese market, as outlined in its Thursday ASX announcement, includes:
“Re-establishing distribution for Penfolds entry-level Australian COO portfolio, including Penfold’s Max’s, Koonunga Hill and One by Penfolds
- Re-allocating a portion of Penfolds Bin and Icon tiers from other global markets in order to progressively re-build distribution to China, while maintaining the strong momentum in those other markets where Penfolds has successfully grown in recent years;
- Re-establishing distribution for the Treasury Premium Brands Australian sourced priority portfolio in China, including Rawson’s Retreat; and
- Expanding sales and marketing resources, and brand investment, in China.”
“We’re excited to bring more of our Australian luxury and premium wines back to the China market but we’re mindful it will take time to sustainably regrow both supply and demand,” said Ford.
“The recent Penfolds China wine releases have received great consumer feedback and praise from wine critics, and we’re continuing to explore increased winemaking opportunities in China as well as broadening our global luxury wine portfolio.
“We’re thankful to the governments in Australia and China for working tirelessly to stabilise relations between both countries, with this work ongoing as we continue to foster our local winemaking ties in China.”
