Dogged by poor sales: Snoop can’t save budget label as drinkers baulk at cheap wine

American rapper Snoop Dogg’s celebrity endorsement of the 19 Crimes wine label helped but has not produced the sales Treasury Wine Estates was hoping for, even at an asking price starting at just $12 a bottle, as demand for budget plonk softens in Australia.

Treasury – an ASX-listed winemaker – saw its shares fall over 7 per cent on Thursday after it told investors that, while demand was still strong for its luxury products, the outlook for commercial wines in Australia and the UK remained challenging.

Snoop Dogg with the Treasury Wines brand 19 Crimes.Credit:

The company said it was reviewing its supply chain to improve its cost of goods sold, and would consider divestment of some of its assets as it works to grow its premium and luxury brands in the current environment.

In an update on the group’s financial performance for 2023 so far, Treasury revealed sales of its entry-level wines showed further signs of deterioration.

“Specifically, the 19 Crimes portfolio continues to perform below expectations,” the company said.

The 19 Crimes range sells from about $12 a bottle in Australia, or $15 in the US, while the Penfolds brand can run into the range of several hundred dollars a bottle.

The company’s investment in growing the 19 Crimes brand has helped cement its foothold in the US market and appeal to a new cohort of first-time wine drinkers. A partnership with Snoop Dogg to launch the “Cali Red” variety in 2020 helped sales surge. 

Treasury Wine is now expecting group sales to decline by between 2 per cent and 3 per cent compared with the same time last year.

Chief executive Tim Ford said the company was reviewing its cost base to make sure the business could continue with its long-term growth plans.

Treasury Wine Estates CEO Tim Ford.Credit: Eamon Gallagher

“With changing consumer preferences and a tightening economic environment in most major markets, we’re taking the opportunity to make changes in our business now, so we have increased flexibility in the future to continue to grow our premium and luxury portfolios,” he said.

Citi analysts said in a note last week that based off a number of data sets about the US wine sector, retail channels “appear subdued”, while sales through cellar doors could be tougher for winemakers because of a range of factors, including increased pressure on household budgets.

However, ASX-listed drinks retailer Endeavour Group has been upbeat about the resilience of liquor sales in recent times, including budget and more premium options.

The boss of the Dan Murphy’s operator told this masthead earlier this month that shoppers were still more than comfortable to head to the pub or indulge in their regular tipple of choice.

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