- Australian alcohol industry witnessed worst month on record in April wrt sales of wine, beer and spirits amid COVID-19 pandemic.
- A variation in Australians’ drinking behaviour has been noted during shutdowns, with ~85.6 per cent drinking responsibly.
- Accolade is offering huge discounts to bars, pubs and restaurants; targeting the American wine market to tap new customers and planning to roll out flat wine bottles to leverage sustainability benefits.
- Treasury Wine is asking for customer-specific needs and targeting long term growth profile by considering potential demerger of Penfolds.
- With wine industry preparing for economy re-opening, businesses are striving to stay competitive adopting unique customer-centric strategic initiatives as the key to survival.
April 2020 turned out to be the worst month on record for sales of wine, spirits and beer amid COVID-19 driven lockdown measures, indicated by the latest report by Alcohol Beverages Australia. The report suggests that Australian wine producers are observing volume losses of up to 70 per cent among SMEs that rely on restaurants as the key route to market.
The data is largely in line with ABS recent statistics confirming about 85.6 per cent of Australians to be responsibly drinking during coronavirus lockdown, with around 30 per cent abstaining or not consuming alcohol. The data exhibits COVID-19 repercussions on the nation’s alcohol industry bearing the brunt of social distancing and lockdown measures.
Amidst these implications, Australian wine players are adopting different approaches to bring their businesses back on track. Having said that, let us discuss two renowned companies in the Australian wine industry, redressing COVID-19 consequences via different means:
Accolade Wines Going All Out to Stimulate Growth
As Australia initiates re-opening of economy in a phased manner, Accolade Wines gears up to stimulate growth after months-long social distancing restrictions in place. The Company is offering huge discounts to bars, pubs and restaurants in order to get hold of market share from its competitor, Treasury Wine Estates Limited (ASX:TWE).
The offer is being provided under the Company’s recently launched ‘Your Venue, Our Shout’ initiative to support hospitality industry get back on its feet. The initiative also includes the stock replacement offer for both new and existing customers by which they could replace, as complimentary stock, any wines from the Company’s portfolio sold across venues during the first month from re-opening.
In addition to these initiatives, the Company recently undertook two significant moves consistent with its growth driven approach, as discussed below:
Appointed Significant Partner to Drive Growth in US
Accolade has lately hired a California-headquartered company Quintessential Wines LLC. to represent some of its famous brands in the US, with America being a key growth market for the Company. As a part of the partnership, Quintessential would primarily represent the following Accolade brands:
- Hay Maker and Mud House from New Zealand
- St Hallett and Grant Burge from Australia
- Stone’s Ginger Wine
- The Italian Prosecco Da Luca
- Echo Falls Fruit Fusions range
The partnership would enable the launch of Accolade’s most famous brands to fresh customers across the US. Quintessential would initially market the Mud House Central Otago Pinot Noir and the Mud House’s Marlborough Sauvignon Blanc.
Collaborated with Garçon Wines
In April this year, the Company announced a new collaboration with the inventor of multi award-winning flat wine bottles Garçon Wines. One of the most respected wine critics across the world, Jancis Robinson recently called Garçon Wines’ flat wine bottle “ground-breaking”. Besides, these flat wine bottles have won numerous awards for innovation, sustainability and design.
Another important thing to note is that these flat wine bottles are eco-friendly, made entirely of recycled PET not single-use plastic, which considerably cuts down logistic costs and carbon emissions from the whole wine supply chain.
As a part of the collaboration, the Company would offer several of its New World wine brands in flat wine bottles of Garçon Wines later in 2020. The UK’s leading wine brand, Hardys would be one of the brands included in such collaboration on a multinational basis.
The collaboration also involves setting up a customised bottling line for flat wine bottles for the first time at Europe’s largest wine distribution and warehouse facility, Accolade Park. The bottling line would enable Garçon to fill wines at large scale and would allow the Company to further harness the sustainability advantages.
Accolade’s growth-driven initiatives seem to strengthen the Company’s ability to rebound strongly as soon as the venues reopen.
Treasury Wine Estates Adopts a More Tailored Approach to Battle COVID-19
The famous winemaking brand, Treasury Wine Estates Ltd (ASX:TWE) is adopting a more customised approach to fight COVID-19 shutdowns. The Company is in talks with its customers over their specific needs, including promotional deals as they reopen, in order to serve them in the best way possible.
Additionally, in April this year, TWE declared its intention to take into account a demerger of Penfolds business and related assets into a separate firm listed on the ASX by 2021. The Company’s decision to consider a demerger followed the completion of a strategic review of its portfolio and an evaluation of both the business structure and optimal strategy.
The Company believes that the review would stimulate the creation of incremental long-term value by enabling one team to emphasize on steering the luxury Penfolds multi-country of origin portfolio (French, US and Australian sourced propositions); with a separate team to focus on speeding up the mix shift towards Luxury business in new TWE while also lowering and scaling the Commercial portfolio.
On Penfolds’ potential demerger, Chief Executive Officer of TWE, Mr Michael Clarke commented:
Subject to the global COVID-19 pandemic, stabilisation of market volatility and shareholders’ approval, the Company has anticipated completion of the potential demerger by the end of calendar year 2021.
TWE stressed that it would provide a future state Luxury business that lasts the premiumisation strategy regardless of the Penfolds demerger. Besides, it would pursue various initiatives to lower the scale and size of its Commercial wine segment, especially in the US.
The retained Commercial business would include a smaller portfolio of differentiated and profitable brands that would continue to appeal to consumer preferences and trends across major markets.
In order to see through its possible demergers, including Penfolds demerger, Treasury Wine Estates has also recently appointed Mr Stuart Boxer as its Chief Strategy and Corporate Development Officer.
What’s worth noting is that TWE retains an efficient and flexible capital structure which is in harmony with its investment grade profile, incorporating a well-diversified and stable debt maturity profile and considerable headroom with regards to its financial covenants.
Although wine players are going great lengths to recover from COVID-19 crisis, uncertainty prevails over the pace of revival amidst ambiguity over the duration of pandemic. With Chinese investors bolstering stakes in Australia's wineries, concerns are also looming over wine industry becoming the next victim of AU-China trade war. However, economy reopening is likely to offer greater impetus to the recovery of industry, with wine being Australians much-loved beverage.
There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.
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