Treasury Wine Estates (TWE.AX) dropped nearly 8% on Thursday after warning that inflation was restricting demand for its commercial-grade wine and raising packaging costs.
The country’s largest winery said it was reviewing its domestic supply chain due to adverse market conditions and consumption prospects for commercial wine, especially in Australia and the UK.
Wine is a pleasure, not a need. But, according to eToro market analyst Josh Gilbert, customers will cut back on wine during the cost of living issue.
Premium brand sales have boosted revenues for winemakers worldwide.
Carl Capolingua, a ThinkMarkets industry analyst, said premium brand consumers would drink wine during the cost of living issue.
Treasury Wine may also sell some assets.
The benchmark stock index (.AXJO)’s greatest loser was the company’s 7.8% drop.
Treasury Wine expected a 2%-3% reduction in fiscal 2023 group net sales revenue due to Treasury Americas and Treasury Premium Brands underperforming.
Penfolds’ owner has shifted from low-margin “commercial” wine to higher-end, more good wines in recent years.
Treasury Wine said that its “19 Crimes” portfolio, endorsed by American rapper Snoop Dogg, had continued to underperform in the US.
The business expects fiscal 2023 earnings before interest, tax, SGARA, and material items to improve from A$523.7 million to between A$580 million and A$590 million ($393.41 million-$400.20 million).
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