Treasury Wine executives eye key roles after three-way split

Treasury Wine Estates is progressing towards a proposal for a three-way split of its global operations and has narrowed the potential leadership field.

Treasury Wine Estates chief executive Tim Ford. Picture: Aaron Francis

Treasury Wine Estates is progressing towards a proposal for a three-way split of its global operations and has narrowed the executive field as to who will lead each newly created division if the overhaul of its sprawling winemaking operations is accepted by the board.

No firm decision has been made on the reshuffle of its executive ranks to run the new businesses, and much will depend on the separation of key brands and regions, but the focus on Treasury Wine’s executive leadership team is tightening as roles are analysed.

It is believed that the current president of the Americas, Ben Dollard, is likely to stay in his role to run the Americas pillar.

There are a number of names in the hat to run a commercially focused division of some of Treasury Wine’s most popular brands but Australia and New Zealand managing director Peter Neilson has firmed as the favourite.

Tom King, Treasury Wine’s boss of Asia, could be tapped on the shoulder to run a luxury/premium wine division dominated by the flagship Penfolds brand.

Mr King leads the business that was responsible for delivering the bulk of group profitability before crushing tariffs were imposed by Beijing late last year, and if he emerges as one of the triumvirate of executives to run a newly structured Treasury Wine it is unclear where he would be based.

No appointments have been signed off or disclosed internally to staff but these three executives are now viewed by many as the frontrunners to take on the new roles should Treasury Wine chief executive Tim Ford and his board trigger the structural split.

The board will meet next week to discuss the structural split proposal as well as the half-year results, and an update on the split could be announced as early as Treasury Wine’s half-year report in a fortnight.

The three-way split has not been finalised as yet but one possible combination under internal review at Treasury Wine is a stand-alone Penfolds business, with the Americas and most of the Australian and New Zealand brands housed in the third business, tentatively called Treasury Premium Brands, that would hold commercial brands but with some masstige and premium brands.

The Australian reported on Monday that Treasury Wine, which owns the luxury brand Penfolds as well as a long tail of middle-ranked and commercial wines from Wolf Blass to Rosemount Estate, was investigating a three-way split to create a stand-alone US business, a premium or luxury winemaker and a more commercial-focused wine company that would splinter more than $7bn in global wine assets.

The sticking point for the moment is the allocation of wines to the twin pillars outside of the Americas, which represent a sprinkling of commercial, middle ranked or masstige as well as premium brands. There are also complications around the location of vineyards and processing facilities that makes the choice of which division to slot them under difficult to decide.

Structurally separating Treasury Wine, or even demerging parts of the business, has been a constant conversation within the Melbourne-based offices of the winemaker and stretches back to when it was itself demerged from brewer Foster’s Group in 2011.

Mr Ford’s predecessor, the highly ambitious CEO Michael Clarke, raised the proposal of a full demerger of the $6bn flagship luxury brand Penfolds in 2020 and leaving a rump of middle-ranked and commercial wines within Treasury Wine.

But those plans were later scuppered by the worsening COVID-19 pandemic and punishing Chinese import tariffs of 169 per cent slapped on all Australian wines from November.

Under Mr Ford further work has been done on the proposal as the company contemplates a number of internal operating models to boost profits at a time when it is facing the shredding of its China business that generates around 40 per cent of earnings.

“What has become clear is that there is value to be created out of separate focus between Penfolds and the rest of our portfolio. However, from a time-frame point view we are focusing … just to make sure we work through the pandemic period and recover the business to the point we want to,’’ Mr Ford told The Australian last year.

Shares in Treasury closed up 0.3 per cent on Friday at $10. They have lifted only 16 per cent from the depths of the market crash last March, compared to the broader ASX 200 which is up some 50 per cent.