TWE Chief: US Acquisition is “Definitely in the Cards”

Treasury Wine Estates reported a net sales revenue increase of 12.5% in the Americas for the first half of fiscal 2019. The company’s US performance was affected by the recent overhaul of its route to market strategy and investments in creating their own merchandising and sales teams in the region.

ON ROUTE TO MARKET CHANGES. You may recall, in Q4 of TWE’s previous fiscal year, the company changed up 40% of its US distributor network and it now self-distributes for about 25% of its business in the US [see WSD 01-30-2018]. Nine months later, TWE chief Mike Clarke said on last night’s earnings call that they are “very pleased with the progress.”

The new route to market models are fully embedded and “should settle down as we go half year by half year,” said Mike, adding it will be “more orderly very quickly.”

In H1, ensuring a smooth transition was a priority. Now, “there’s an opportunity to revisit capitalizing our business in America,” he said.

M&A IMMINENT. When asked about M&A activity in the US, Mike said: “An acquisition in the US is still definitely something on the cards.” The company is interested in either acquiring or merging with someone and is open to either incorporating another company through their business model or merge the business models together.

But it’s not something they’ll rush into. “When it comes to M&A we’re unbelievably patient,” he said.

You may recall, there were rumors circling this time last year that TWE was eyeing Ste. Michelle Wine Estates.

ON TARIFFS AND TRADE. TWE does a lot of business in China and because of that, it’s given them a leg up on the retaliatory tariffs. Mike believes there’s “still an opportunity to continue to grow our US portfolio outside the US.” The trade wars are affecting the value chain, but TWE is currently absorbing the costs, according to Mike.

“We can handle that, while our US competitors are finding it very hard because they don’t have the same infrastructure [in Asia].”

“The results presented today demonstrate not only the strength of our premiumization strategy and global balance, but in particular they highlight the strength of our competitively advantaged regional business models,” says Mike.

We’ll have more color on the company’s US performance and strategy in tomorrow’s issue featuring commentary from TWE Americas chief Victoria Snyder.

HOUSE REPS REINTRODUCE FET REDUCTION BILL

Last week, the Craft Beverage Modernization and Tax Reform Act was reintroduced in the Senate. Yesterday, US Reps Ron Kind and Mike Kelly reintroduced the bill into the House.

The bill would make the following tax benefits–which are set to expire at the end of the year–more permanent:

— For distillers the tax rate drops from $13.50 to $2.70 for the first 100,000 proof gallons.
— For wineries the tax rate is 90 cents per gallon on the first 100,000 gallons
— For brewers the tax rate drops from $7 to $3.50 on the first 60,000 gallons.

Continuing the tax relief for the beverage alcohol industry is a priority for most industry trade organizations including the Distilled Spirits Council, American Craft Spirits Association and the Wine Institute.

We’ll have more as the legislation progresses.

NM LAWMAKERS INTRODUCE BILL TO BAN OUT-OF-STATE RETAILER SHIPPING

New Mexico lawmakers are looking to block out-of-state wine retailer shipping. Under current state law, out-of-state wineries can ship to New Mexico consumers as long as their home state also allows New Mexico retailers to ship. SB 127 would block out-of-state wine retailer shipping altogether.

“Senate Bill 127 is a purely protectionist and anti-consumer bill that strips New Mexico consumers of a right they have enjoyed for many years to obtain wine from out-of-state wine retailers that they can’t find locally,” says National Association of Wine Retailers executive director Tom Wark. “The bill is meant to protect the deep pockets of billion-dollar, wholesaler middlemen that want protection from competition.”

WSD BRIEF:

INTEGRATED BEVERAGE GROUP APPOINTS NEW PRESIDENT. Integrated Beverage Group, which owns Great Oregon wine Company, Duck Pond Cellars, Rascal and Replica, has named Patrick Larkin as president. Patrick joins the company from Voss Water, where he worked as vp for the Americas. In his new role, he will prioritize growth of IBG’s on-premise business and report directly to ceo Ari Walker, per a release.

Until tomorrow,
Sarah

“If love is the answer, could you please rephrase the question?” – Lily Tomlin

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