Treasury Wine loses major Californian distributor and warns on profit
The shock decision by a top US wine distributor to exit the Californian wine market completely has left Treasury Wine Estates scrambling for a new partner, with the Penfolds maker also warning on earnings due to the rocky economy.
Business
Don't miss out on the headlines from Business. Followed categories will be added to My News.
Treasury Wine Estates, the maker of Penfolds, Pepperjack and Lindeman’s, has suffered a major setback in its grand ambitions to forge a thriving premium wine business in the US after its key distributor in California – which generates one quarter of its North American sales – decided to pull out of the Golden State.
It leaves it scrambling for a new distributor in California, with the shuttered operator responsible for 10 per cent of group sales.
Hurting the winemaker too is weaker consumer demand in the US driven by economic uncertainty which has forced Treasury Wine to warn of lower than expected earnings for fiscal 2025. Over the last few years it has spent more than $2bn to buy up premium Californian wineries.
Treasury Wine on Tuesday warned it now expects 2025 earnings to be approximately $770m, with the variance to the previously provided outlook of ‘approximately $780m’ driven by lower than expected premium wine portfolio shipments in the US.
The company cited the American economic uncertainty and demand picture, which was rocking category performance at price points below $US15 a bottle.
It comes as Treasury Wine is now also forced to find a new route to market into California.
The shock and sudden decision by Republic National Distributing Company to pull out of the state completely has surprised the US wine industry. It leaves Treasury Wine without a distributor in one of the biggest drinking states and will be a major headache for incoming Treasury Wine chief executive Sam Fischer when he joins the winemaker later this year.
“Treasury Wine Estates has been advised by Republic National Distributing Company, one of its US distributors, that it will cease operations in California, effective 2 September 2025,” the company said in an ASX statement.
“TWE has begun evaluating alternative distribution arrangements for its portfolio in California to determine an appropriate path forward.
“As the leading luxury wine supplier in the US market, TWE is confident that its history working with an extensive network of US distributors, combined with its proven experience in effectively managing distributor changes, which it has done a number of times in the ordinary course through recent years, positions the company strongly to transition to a new route to market in California in the near-term.”
The US market has a unique wine distribution model that is made up of tiers, and in most states the winemaker cannot directly sell to a wine store or retailer but must instead sell to a distributor or middleman.
RNDC’s September exit of its California operations is not expected to impact Treasury Wine’s earnings in 2025 however analysts have raised concerns about possible impact to 2026 earnings.
Treasury Wine’s relationship with RNDC spans 25 US states. The closure of RNDC’s California operations is not expected to impact the remainder of its business, and RNDC has reiterated its commitment to investing in and driving Treasury Wine’s portfolio in the remaining 24 states, the company said.
Treasury Wine under outgoing chief executive Tim Ford has invested heavily in California to transform the business into a leading player in the premium US wine market.
Mr Ford agreed to spend $1.6bn in 2023 to purchase Californian luxury wine group Daou Vineyards and another US winemaker, Frank Family Vineyards, for $434m in 2021 as he stormed the elite end of the world’s biggest wine market.
More Coverage
Originally published as Treasury Wine loses major Californian distributor and warns on profit
Another ex F45 gym in administration with $1.6m debts
Creditors will decide if a company that operated an F45 gym should be placed into liquidation after it collapsed owing more than $1m.
Huge loss on Maggie Beer dairy sale
The gourmet food company inspired by celebrity chef Maggie Beer has sold a struggling dairy business, but only after accepting a huge multi-million dollar loss.