Penfolds maker Treasury Wine Estates says it is extremely disappointed by China’s 169.3 per cent tariff on its wines and plans to cut costs and pivot more towards other markets such as Vietnam, Thailand and the United States in response to the shock move.
The company said the China tariff decision, announced suddenly on Friday, would ripple across the Australian wine industry costing jobs and damaging regional communities.
“We are extremely disappointed to find our business, our partners’ businesses and the Australian wine industry in this position,” said Treasury chief executive Tim Ford.
“We will continue to engage with MOFCOM (China’s Ministry of Commerce) as the investigation proceeds to ensure our position is understood. We call for strong leadership from governments to find a pathway forward,” he said.
While Treasury plans to boost its focus on other export markets, the company also said it will keep sending its wine to China.
China is a lucrative market for ASX-listed Treasury Wine, generating about two-thirds of its earnings in the 2019-20 financial year, equal to about 30 per cent of the total company’s earnings for the period. Last financial year Treasury delivered EBITS (earnings before interest, tax and the agricultural accounting standard SGARA) of $533.5 million.
Mr Ford said on Monday morning that the companies had opportunities to do better in the Australian, south east Asian and northern Asian markets. He also said that Penfolds had a small presence in the US, but the company hoped to build the brand in the US, a massive wine market.
“Short, medium and long term our intention is very clearly on building our business outside of China over the next period of time,” he said.
Mr Ford, who took over as chief executive from long term CEO Michael Clarke in the middle of the year, also said Treasury would not slash prices.
“We are not going to discount price to move volume. We don’t believe we need to do that,” he said.
More to come
Source: Thanks smh.com