Treasury Wine Estates will shut regional winery facility in Mildura and vineyards as cheap wine sales fall
Consumers are pulling back on cheaper, commercial wines such as 19 Crimes backed by US rapper Snoop Dogg, forcing Treasury Wine Estates to close a regional winery facility.
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Treasury Wine Estates, the maker of Penfolds, Wolf Blass and Lindemans, will shut down its Karadoc winery in north-west Victoria and list the facility for sale as the global downturn in sales of cheaper, commercial wine forces it to rationalise its winemaking footprint and trim costs.
The decision to close Karadoc – which will impact 60 jobs – comes as Treasury Wine warned in May that it was facing retreating sales and softer earnings in the face of a pullback by drinkers to grab for lower priced wines, such as its juggernaut label 19 Crimes backed by US rapper Snoop Dogg, as consumers reined in discretionary spending.
Commercial wines such as 19 Crimes and Lindemans, of which both were made at Karadoc, have been struggling recently, especially in key markets in Australia and Britain and the category is expected to remain under pressure for some time.
Treasury Wine is keen to pivot to premium and luxury wines, which are holding up better than commercial wines, led by its flagship brands such as Penfolds.
In the face of that poorer profit outlook, Treasury Wine chief executive Tim Ford had started to cut costs in its commercial wine operations and look for other savings across the winemaker’s global footprint, with the closure of the Karadoc facility near the Victorian regional centre of Mildura one of the high-profile casualties.
Treasury Wine announced on Wednesday that Karadoc in north-west Victoria would close by mid-2024, in response to changing consumer preferences and to enable the company to focus on continued growth in its luxury and premium wine portfolios.
Chief supply officer Kerrin Petty said it was a challenging time for the wine industry globally and while the site was able to remain operational throughout the pandemic, the decline in commercial wine consumption along with rising costs meant it was no longer a possibility to keep the winery open in the long-term.
“Making the decision to close a site is something we take very seriously and is a last resort after we’ve looked at all other possible options,” Mr Petty said.
The Karadoc winery has been in operation since 1973 and currently makes commercial wine for Treasury Wine including 19 Crimes, Lindeman’s, Wolf Blass, and Yellowglen. The site will be listed for sale.
As part of the cost-cutting and consolidation of its winemaking facilities, Treasury Wine also plans to divest its commercial vineyards in Lake Cullulleraine (north-west Victoria) and Yankabilly (south-west New South Wales).
The crushing and bottling operations at Karadoc have a maximum capacity of around 110,000 tonnes, but the latest vintage saw only 60,000 tonnes processed and this has made the facility less commercially viable.
This is being partly driven by the downturn in commercial wine.
“Globally, the wine industry is seeing consumers shift away from commercial wine (less than $10AUD a bottle). Over the coming years, we expect commercial volumes at Karadoc to continue to decline and volumes to be at around 60 per cent of the capacity that the site is built to process,” Mr Petty said.
Given 70 per cent of costs at Karadoc are fixed, processing less volume means the cost of running the site is substantially higher, Treasury Wine said.
Approximately 60 Treasury Wine team members will be impacted, and the company said it will work with each team member to support them in finding alternative employment as the site transitions to its closure.
The brands made at Karadoc will continue to be made with long-standing local Treasury Wine winemaking partners Zilzie Wines and Qualia, and at Treasury Wine’s Barossa winery in South Australia.
Originally published as Treasury Wine Estates will shut regional winery facility in Mildura and vineyards as cheap wine sales fall
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