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Wednesday 8 April 2020

Penfolds set to spin off from parent wine company

Treasury Wine Estates, Australia’s largest wine company, is considering a plan to spin off its flagship Penfolds brand into a separate company by the end of 2021.

The demerger plan is a key outcome of TWEs strategic review, which it announced to the Australian Securities Exchange this morning. 

If Australia’s biggest wine company does split, the Penfolds business will be the larger of the two with the ‘New TWE’ focusing on a reduced portfolio of commercial brands which include the likes of Rosemount Estate and 19 Crimes.

The statement said the move would build on TWE’s internal operating model, which is focused on "premiumisation" and accelerating the separate focus for luxury versus commercial portfolios globally.

Penfolds was founded at Magill near Adelaide, South Australia, in 1844 and produces Australia’s most revered wine Penfolds Grange. It still has a cellar door and small vineyard at Magill Estate but its main production winery is now located in the nearby Barossa Valley, where it sources much of its fruit.

TWE chief executive Michael Clarke said Penfolds accounted for about 10% of the firm’s volume but well over half its earnings.

“A potential demerger would enhance New TWE’s and Penfolds’ ability to pursue their own strategic priorities and deliver a stronger long-term growth profile under separate teams and ownership structures,” he said.

TWE announced in 2018 it was expanding its footprint to begin making premium Penfolds red wine from Californian grapes in Napa Valley, and Champagne in France.

This morning’s statement said the potential demerger would help drive this multi-country of origin portfolio while a separate team focused on accelerating the shift towards luxury in New TWE.

Other well-known South Australian TWE brands include Wolf Blass, Wynns Coonawarra and Seppelt. 

The Penfold family sold its controlling share of the company in 1976 and it became part of the Foster’s Group from 2005. TWE was formed in 2011 and listed on the ASX after Foster’s decided to split its wine and beer businesses.

# Information from The Lead SA 

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