Treasury Wine Estates (TWE) has delivered a standout performance in the first half of fiscal 2025 (1H25), fueled by its luxury-led strategy. Net Sales Revenue (NSR) climbed 20.2% to AUD 1,544.2 million, and EBITS soared 35.1% to AUD 391.4 million, driven by Penfolds and DAOU. Yet, the premium and commercial segments tell a different story, grappling with soft demand and a tougher market. With uncertainties lingering in China and the U.S., this analysis dives into TWE’s financials, brand dynamics, and the trends shaping its dual-track journey.
1. Financial Performance: Luxury Shines, Lower Tiers Dim
TWE’s 1H25 results highlight its luxury pivot:
- NSR: AUD 1,544.2 million (+20.2% YoY), with luxury NSR surging 52.0% (18.2% organic), now 55.8% of total NSR—up 11.7 points.
- EBITS: AUD 391.4 million (+35.1%), margins hitting 25.3% (+2.8 ppts) thanks to premiumization and tight costs.
- Net Profit After Tax (NPAT): AUD 220.9 million (+32.5%), supported by a cash conversion leap to 90.4% from 75.2%.
- Full-Year EBITS Guidance: AUD 780 million, at the lower end of AUD 780-810 million, tempered by weaker Treasury Premium Brands outlook.
Luxury’s dominance offsets a combined 4.9% decline in TWE’s premium and commercial NSR, reflecting the contrast in performance across segments.
2. Brand Performance: Winners and Stragglers
Penfolds: A Resurgent Star in Asia
- NSR: AUD 557.4 million (+24.4%); EBITS: AUD 250.2 million (+33.9%), with a robust 44.9% margin (+3.2 ppts).
- Key Driver: Bin & Icon shipments powered Asia’s growth, especially in China, where Australian COO wines saw double-digit depletions and strong e-commerce momentum.
- Challenges: Modest NSR dips in EMEA and ANZ reflect stock reallocation to China, though broader portfolio gains softened the impact.
- Outlook: Low double-digit EBITS growth is expected for F25 (43-45% margin), with an annual growth target of 15% for F26-F27 if market conditions remain stable.
Treasury Americas: DAOU Powers Ahead
- NSR: AUD 631.1 million (+41.0%); EBITS: AUD 155.3 million (+66.9%), margin at 24.6% (+3.8 ppts).
- DAOU Impact: Contributing AUD 194.1 million (+11.2% like-for-like), synergies are now expected to reach USD 35 million—up from USD 20 million+.
- Organic Struggles: Excluding DAOU, luxury NSR declined 8.5%, impacted by weaker U.S. trade channels and lower DTC sales due to reduced discounting.
- Outlook: Luxury NSR is expected to stabilize in 2H25, supported by DAOU’s integration and strong intake from the 2024 California vintage.
Treasury Premium Brands: Facing Headwinds
- NSR slipped 8.4% to AUD 355.7 million, while EBITS fell to AUD 22.9 million (-49.9%), pushing margins down to 6.4% (-5.3 ppts).
- Challenges: Soft demand for wines under AUD 30, with the Americas (-27.6%) and EMEA (-10.6%) facing the biggest declines. The prior-year vineyard sale gain also contributed to the year-over-year drop.
- Positive Signs: The relaunch of Rawson’s Retreat in China and double-digit growth from Squealing Pig offer potential upside.
- Outlook: The planned transition to a Global Premium division by F26 aims to stabilize performance, but recovery will depend on broader consumer spending trends.
3. Industry Trends: Premiumization vs. Market Volatility
- Global Premiumization: Luxury wines (above AUD 30) continue gaining traction, particularly in the U.S. and Asia, aligning with TWE’s focus.
- China’s Uneven Recovery: Online wine sales grew 6% and offline sales 2% in 1H25 (Smart Path, Dec 2024). While Penfolds’ strong brand presence has driven growth, broader high-end imports have yet to see a sustained rebound.
- Digital Divide: Penfolds’ e-commerce growth contrasts with weaker U.S. DTC sales, reflecting changing consumer behavior.
- Sustainability Efforts: Investments in low/no-alcohol wines and green practices position TWE for long-term growth.
4. Strategic Moves: Strengthening Market Position
- Penfolds in China: The RMB 130 million acquisition of Ningxia Stone & Moon Winery reinforces TWE’s commitment to localized production, despite an uncertain market.
- DAOU Integration: A dedicated luxury team and Paso Robles supply chain improvements strengthen Treasury Americas’ foothold in the U.S. luxury wine segment.
- Premium Portfolio Strategy: Following a strategic review, TWE has opted to retain its Commercial portfolio, concluding that the offers received did not present compelling value. The company will transition to a Global Premium division under Angus Lilley by July 2025.
5. The Road Ahead for TWE
TWE’s luxury engine—Penfolds and DAOU—has been the driving force in 1H25, now accounting for more than half of total revenue and delivering a 35% EBITS surge. However, the struggles in the premium and commercial segments remain evident, with Treasury Premium Brands’ 8.4% NSR decline and 49.9% EBITS drop exposing challenges.
China’s recovery remains fragile, with consumer confidence and broader economic conditions shaping future demand. In the U.S., DAOU’s continued success will depend on competitive positioning against local luxury brands. Additionally, supply chain constraints and foreign exchange fluctuations, as flagged in the financial report, pose further risks.
While uncertainties persist, TWE’s strong digital presence, premiumization strategy, and strategic investments in key markets offer a path forward. The company’s ability to maintain Penfolds’ momentum in Asia, unlock DAOU’s full potential in the U.S., and revitalize its mid-tier offerings will be critical in navigating its dual-track growth trajectory.
