Upbeat Treasury Wine Estates boss Tim Ford bullish about China’s luxury shopping spree

For a man about to launch a $950 bottle of red wine in the midst of a global recession, Tim Ford is extraordinarily positive.

Treasury Wine Estates CEO Tim Ford ahead of the annual release of the Penfolds vintage. Picture: Aaron Francis/The Australian

For a man about to launch a $950 bottle of red wine in the midst of a global recession, Tim Ford is extraordinarily bullish.

He’s surprisingly cheerful too about the strength of the luxury end of the wine market — and, even more than that, is embracing an optimistic outlook for an economic rebound in China that he believes is already underway and where he hopes to sell a large portion of his vintage.

But Mr Ford isn’t selling just some bog-standard Australian red. As the new chief executive of Treasury Wine Estates, he is selling the superstar 2016 Penfolds Grange as well as the 2020 Penfolds collection which hits the market on Thursday.

“The Penfolds release builds a great excitement not only internally but also within our customer base and the wine industry, and it’s probably even more important in the current environment.

“We like to bring moments of joy, and this should be one of them,’’ Mr Ford told The Australian in his first interview since taking TWE’s reins last month.

There is a lot riding on this year’s annual Penfolds release. It generates the core of TWE’s profits at a time when the rest of its business is struggling. It is Mr Ford’s first major outing since ­replacing former CEO Michael Clarke, and it comes at a time when the global coronavirus pandemic has bruised China — the company’s biggest market — and is damaging economies all over the world.

Into this maelstrom, Penfolds is launching its luxury 2016 Grange as well as the latest vin­tages of its other hugely popular brands including Yattarna, Bin 389 and St Henri.

Red wine, blue skies

But Mr Ford can’t help being bullish. He not only sees strong demand for premium and luxury wine but also plenty of blue skies in China which will snap up as much of its allocation of Penfolds wines as it can.

“Our major market is the China market and I think it is a great time to be releasing the wines, particularly now as China starts to recover and we are seeing some really strong recovery in China,’’ said Mr Ford, a South Australian native and a vocal supporter of ladder leader Port Adelaide in the AFL.

“So with China being one of our key markets, it’s a great time to do the release. We certainly see demand and consumption returning back to pre-COVID normals, which is fantastic.”

Such is the strength of the bounce back following the pandemic that Penfolds’s only public launch with crowds for the wine will be in China.

On the prickly issue of China and Australia’s burgeoning tensions with Beijing, Mr Ford said he hadn’t seen any evidence of punishment being wrought on Australian wine in general, nor on his TWE portfolio.

“We haven’t seen anything on the ground or anything with our customers that would suggest any issues with that — and compliance, dealing with our customer base and local rel­ationships, are a very important part of that. That’s our focus in terms of driving that business and (there is) no impact at this point.’’

Cashed-up Chinese drinkers

While cashed-up Chinese drinkers are willing to spend up for the new Penfolds wines, Mr Ford maintains that in its other markets — from Australia to Europe and the US — that despite the severe economic downturn, there is a place for luxury wines and a budget for the latest Penfolds launch for its target market.

“The Penfolds brand in China clearly is a trusted brand, but it’s the same across the globe,” he said. “There is going to be … a global economic recession … but there will still be discretionary spending on luxury items.

“With that discretionary spending, people are going to ­become very specific about what they spend it on and make sure that it delivers on that luxury experience. And we ascertain that Penfolds as a brand in any market will guarantee that luxury experience and quality of product.

“So, we certainly believe there will still be luxury discretionary spending and our belief is it will be more on Penfolds than other portfolios around the globe.”

Questions hang over how much longer Mr Ford will control Penfolds, after his predecessor examined the possible demerger of Australia’s most famous wine brand from the rest of TWE’s commercial wine portfolio.

Penfolds spin-off?

That demerger examination is continuing under Mr Ford, who is focused not so much on how TWE looks but on how to optimise its portfolio and return the company to growth after a recent string of profit warnings and sliding earnings.

However, a spin-off of Penfolds might not be the top choice for Mr Ford.

“My role as CEO as I see it is to develop and define what the best operating model and for our portfolio is across the globe — how we are going to best grow those portfolios — and one option is that we would look at and assess a demerger. There are other alter­natives for how we structure our business going forward as well.”

“They are big decisions but we have got to make sure we have strong portfolios and strong regional businesses before we make any decisions around that.

“Hence, the focus is around what I call the trading environment and ensuring we manage the health and growth of the business in this current state.”