Penfolds hikes prices in bid to reclaim top billing in China

Treasury Wine Estates chief executive Tim Ford is fighting to reinstate Penfolds’ former status as China’s top luxury drop as the $10 billion wine giant doubles its headcount in Shanghai and flags global price increases that will kick in from July.

After China dropped its punishing tariffs on Australian wine on March 28, Treasury Wine has been recruiting to increase headcount in China from 100 to 200, primarily in sales and marketing to reinvigorate Penfolds’ luxury brand status.

Penfolds will have to contend with Bordeaux’s Chateau Lafite Rothschild to reclaim the title of China’s top luxury brand.

“It’s the investment behind the brand, how we bring that brand of life, how we execute in store. Penfolds does an amazing job of what we call the in-store theatre of the brand. The Chinese consumer loves it,” Ford told this masthead.

Treasury Wine is hoping to reconnect with “heartland” customers and attract new ones after having broken down its consumers into categories, distinguishing “new luxuriant” drinkers – generally younger and want a luxury brand experience – from “classic connoisseurs”, who enjoy the theatre of tastings, dinners and grand events.

“We think we understand that better than anyone else,” said Ford. “How you execute against that is where we see the brand succeeding and growing and being very targeted in how we’re going after those consumers.”

At its pre-pandemic height before diplomatic ties between China and Australia soured, China was Treasury Wine’s most lucrative market – accounting for about 30 per cent of total earnings.

From July 1, Treasury Wine will increase prices by an average of 6 per cent for customers around the world, including Australia, which Ford said was based on global demand and supply across a three-four year period.

“We want to continue to build the brand and sell more of the wines consumers are prepared to pay.”

In Australia’s absence, French and Chilean wines have captured market share among Chinese consumers, although Treasury has kept the Penfolds brand alive by introducing a line of Penfolds sourced from multiple origins including Bordeaux, California and China itself.

Penfolds will have to contend with Bordeaux’s Chateau Lafite Rothschild to reclaim Penfolds’ former title as China’s top luxury brand.

“We’re pretty confident we will regain our number one luxury brand status, which we measure based on our sales value in that market, relatively quickly,” Ford said.

During COVID, Penfolds managed to successfully pivot to the US and other Asian markets, which Ford indicated will continue to be a priority for the business.

“We’ll certainly be focusing our attention and investment on those major markets like Australia and Thailand, Malaysia, Singapore,” said Ford.

“China’s a big cherry on top, but it doesn’t mean we walk away from the great investments we’ve made and the great demand you’ve seen in other markets including here in Australia.”

Treasury Wines on Thursday pegged Penfolds’ pre-tax earnings for the current financial year to land between $418-$421 million.

However, earnings margin for the brand is expected to slip to 42 per cent for the period, mainly on the back of the extra costs associated with the company reinvigorating the Penfolds brand in China.

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