Aussie drinks giant Treasury Wine Estates hit by US tariff fallout

Aussie drinks giant Treasury Wine Estates has revealed a fresh blow from the economic turmoil of Donald Trump’s tariffs.

Aussie drinks giant Treasury Wine Estates has revealed the economic turmoil from Donald Trump’s tariffs will wipe up to $10 million off its annual profit.

In an update to the ASX on Tuesday, the country’s biggest winemaker has downgraded its full-year earnings forecast to approximately $770 million from a forecast of around $780 million at its interim results in February.

TWE’s key brands include Penfolds, Rosemount and Seppelt.

The revised outlook was “driven by lower-than-expected Premium portfolio shipments in the US, where economic uncertainty and weaker consumer demand has recently impacted wine category performance at price points below $US15”.

A Penfolds wine tasting event will be held in Melbourne. Picture: Supplied

President Trump’s April 2 “Liberation Day” tariffs, which included a blanket 10 per cent levy on all imports, sparked turmoil in global markets.

Numerous delays, reversals and court challenges have all added to economic uncertainty, with companies across a range of industries, from Target to UPS, reporting weaker sales or revising their forecasts.

TWE stressed at the time of the initial announcement that the blanket levy was not expected to have a “material impact” on its business. It noted Treasury Americas contributed 36 per cent of group earnings in the first half of the year, but only 15 per cent of its portfolio was from Australian and New Zealand wine, with 85 per cent produced in the US.

In its update on Tuesday, TWE said it had been informed that one of its major US distributors, Republic National Distributing Company (RNDC), will cease operations in California effective September 2.

Treasury Wine Estates CEO Tim Ford. Picture: Aaron Francis/The Australian

RNDC California accounts for around one quarter of TWE’s US revenue and 10 per cent of group revenue.

The closure is not expected to impact its results in the current financial year.

“TWE has begun evaluating alternative distribution arrangements for its portfolio in California to determine an appropriate path forward,” it said.

“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.”

RNDC is TWE’s distributor spanning 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 behind and driving TWE’s portfolio in the remaining 24 states,” it said.

US companies have been hit by tariff uncertainty. Picture: Scott Olson/Getty Images/AFP

RNDC’s decision to shutter its California operations comes after it lost supplier contracts for a number of major clients, including Anheuser-Busch.

“We’ve made the difficult business decision to withdraw from California which affects many of the roles in the state,” the company said in a statement on Monday.

“We are complying with all regulatory obligations and are committed to handling every transition thoughtfully and smoothly and ensuring everyone is treated fairly and respectfully. We are grateful for the support of these employees and will do our best to support them during this time.”

TWE has made significant investments in the US market in recent years, spurred by a push to diversify after China imposed tariffs on Australian-made wine amid diplomatic tensions during the pandemic.

In late 2023, it purchased California’s DAOU Vineyards for $US900 million ($1.4 billion) in a major bet on continued growth in the US luxury wine segment (more than $US30 per bottle).

TWE shares fell sharply after Tuesday’s announcement but recovered losses to trade flat at $8.12 by late afternoon. TWE is currently down more than 28 per cent compared with this time last year.

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