Drinkers are picking premium despite inflation, says Treasury Wine Estates chief executive Tim Ford

Treasury Wine boss Tim Ford believes consumers will continue to gravitate to more premium wines despite the rising cost of living.

Treasury Wine Estates CEO Tim Ford, left, with Victorian Minister for Industry Support and Recovery and Trade Martin Pakula at the newly opened St Huberts estate in the Yarra Valley. Picture: Aaron Francis / The Australian

Treasury Wine Estates chief executive Tim Ford says consumers still have a thirst for premium wines despite inflationary pressures around the globe stretching discretionary spending budgets, with habits picked up during the pandemic – buying more expensive wine, but maybe less often – sticking for now.

And while Treasury Wine, the maker of wines such as Penfolds, Wolf Blass and St Hubert’s, has sustained its own cost pressures this year, the winemaker has only pushed through limited price hikes and only in some markets, with Australian drinkers swallowing less price gains than consumers in North America and Europe.

Mr Ford said the financial impact on the company’s operations flowing from higher business inputs – led by freight and packaging – in the second half was similar to that of the first half of fiscal 2022 when the inflationary spike cost it between $5m and $10m in earnings. With an eye on inflation running through the sector and wider economy, Mr Ford said premium and luxury wine should be protected from cost of living pressures and that to date he hadn’t seen a reduction in spending on his top shelf wines as households coped with soaring inflation.

Drinkers were happy to pick out more expensive wines as they celebrated occasions and went out with friends and family.

“We haven’t seen it (pull back) as yet and the dynamics through Covid have continued where people are entering the wine category and they are entering at higher price points than they have traditionally – and that has stuck,” Mr Ford said after opening the new St Hubert’s cellar door, ­tasting room and restaurant in Coldstream in Victoria’s Yarra Valley.

“So we are continuing to see consumers buy less wine but buying better in terms of pricing and from our point of view we see that continuing but we monitor it pretty closely given the inflationary environment.” Mr Ford said history had shown that during economic downturns and other times of high economic volatility drinkers had kept on consuming premium wines, with the premium and luxury wine sector different to other consumer goods categories.

“In terms of dynamics, when you go back over previous recession and other periods, wine does act differently to some of the broader consumer staples … consumers around the globe spend on more premium wines and we don’t expect that to slow down.

“But we do expect clearly consumers at some of the lower wine price points to be more careful in how they spend.”

Mr Ford was at the opening of the new restaurant and cellar door for St Hubert’s, which is a joint venture with the Ryan Hospitality Group, led by a father and son – entrepreneur Gerry and Andrew Ryan – who have combined their expertise to create the guest experience at the St Hubert’s winery, which will eventually include a hotel.

Mr Ryan owns caravan empire Jayco and his Ryan Hospitality Group also operates The Prince, Mitchelton Winery & Nagambie Brewery & Distillery.

This is the first collaboration between Treasury Wine Estates and the Ryan group, with Treasury Wine selling part of the St Hubert’s land and buildings to the Ryan Group to operate the hospitality venue, while Treasury Wine focuses on its core competencies of making the wine.

Mr Ford said inflation was lapping at Treasury Wine’s cellar door and that he had pushed through some price rises for ­customers.

“Inflation is still focused on freight and logistics costs,” he said.

“We are seeing that around the globe still with supply chain disruptions as well as for some of our packaging inputs, which are similar to what we saw in the first half of this year.

“We said back in February that would be a $5m-10m profit impact in the first half and the second half will be similar to that, and it has panned out the way we expected it to.”

He said across its global operations it had “targeted price increases” for some of its wines but that was more so in the US and Europe than Australia.