Mark Aselstine
 
August 22, 2014 | Mark Aselstine

Treasury Wine Estates and a 100M Loss

Every once in a while, you see or hear a shocking number.  In the wine industry, that's usually a sale price for a single bottle of wine, or the sale price of a winery that may, or may not, be profitable.  In this case, Treasury Wine Estates continues to report results, which have shocked a ton of people.

 

Mark Aselstine with Uncorked Ventures. So the big news of the day is that the guys at the Treasury Wine Estates, which owns Penfolds and Beringer, posted a financial loss of about one hundred million dollars for the fiscal year 13-14. It's a staggering number for the wine industry to be sure, and a lot of people are wondering how in the heck does that happen. Quite famously they had to destroy a lot of wine that they couldn't sell a few months back, because it had passed its usable life expectancy and the sell by date. 

What really happens in the industry is if you think about that $8 bottle of Beringer at the grocery store, the distributor that distributes that pays about 4, give or take. It might be a little less, it might be a little more, depending on if you're talking wholesale or FOB. But if you think about $4 for a bottle of wine, just the cork, the bottle itself run about $1.25 for most folks, even on the cheap end. And then you start getting into how much does it cost you to farm for the grapes, or buy the juice, or buy the grapes, pay your wine-maker, etc, etc. 

Long story short, there are razor-thin margins at play as the market in some places has deteriorated, and there's been better competition from other people. Grocery stores have cut pricing. That even further erodes profits. It's a mess, to be sure. I wish them the best of luck. It's not something that we deal with, as far as price point-wise. There's frankly a ton of other wine clubs, and a ton of other retailers from your local wine store to your local grocery store that would do a heck of a lot better job than we would, when you have to pay for shipping. You know, for us, we're focused more on high quality stuff. Although, Penfolds is quite good. But that's kind of what makes it disappointing and all, and I wish them the best of luck. But yeah, not good news from Treasury Wine Estates, and, you know, quite frankly, not great news for the industry in general.

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