Treasury Wine Estates to put some Australian and US wineries for sale

Treasury Wine Estates (TWE) is putting some of its Australian and the US wineries up for sale and closing a packaging and warehousing facility as part of its plan to cut cost.

The Australian vintner, a former unit of Foster's Group, is selling its T'Gallant, Bailey's and Ryecroft wineries in Australia and the Asti winery in California, and will shut the packaging and warehousing facility at its big Karadoc winery near Mildura in Victoria and transfer them to Wolf Blass winery near Nuriootpa in South Australia's Barossa Valley.

In the US, TWE will consolidate its production facilities such that TWE's Asti winery in Sonoma County, California, will become surplus to the company's production needs.

Asti's wine production will be transferred to other wineries within TWE's chain and the majority of Commercial and Masstige wine production to Paso Robles and Luxury wine to Beringer.

In Australia, the packaging and warehousing of wines previously processed at Karadoc, will now be transferred to TWE's Wolf Blass facility in the Barossa, South Australia and commercial wine currently processed at TWE's Great Western and Wynn's Coonawarra facilities to the Karadoc site, with Karadoc to become exclusively focused on the production of TWE's Australian Commercial wine portfolio.

The phased closure of packaging and warehouse operations at Karadoc will be completed during fiscal 2016, TWE said in a statement.

Commercial wine currently processed at TWE's Great Western and Wynn's Coonawarra facilities will be transferred to the Karadoc site, with Karadoc to become exclusively focused on the production of TWE's Australian Commercial wine portfolio.

At the same time, the processing of Masstige wine at Great Western and Wynns Coonawarra will be transferred to Wolf Blass in order to increase Luxury wine processing and warehousing capacity at these sites.

The company said that it would book a total provision of $35 million as a result of the supply-chain changes in Australia and the US, and an extra $15 million in one-off costs to pursue "overhead" cost savings, taking the total write-downs to $50 million.

As part of TWE's strategy to focus on fewer brands, TWE will also start a sale process for excess assets in Australia including the Ryecroft winery, T'Gallant and Bailey's properties.

Treasury Wine, which has a market cap of A$3.3 billion, was spun off by Foster's Group in 2011 after a decade-long expansion by the beer maker into wines in Australia and the US at a cost of nearly $6 billion.

It has a unique portfolio of premium global brands, which includes iconic brands such as Beringer, Chateau St Jean, Lindemans, Wolf Blass, Penfolds, Rosemount, Wynns Coonawarra Estate, Stags' Leap Winery, Matua Valley, Etude, Castello di Gabbiano, Australia's Seppelt, Coldstream Hills, and Devil's Lair.

With over 12,000 hectares of vineyards, Treasury Wine employs over 4,000 winemakers, viticulturists, sales, distribution and support staff across 12 countries.

The company's first wine acquisition was Mildara Blass Ltd in 1996 for $482 million while it paid $2.6 billion in cash and debt for California's Beringer Wine Estates Holdings Inc in 2001.

With its $3.2-billion purchase of Southcorp Ltd in 2005, it cemented its ranking as the world's second-biggest winemaker behind Constellation Brands Inc.

The company CEO, Michael Clarke is currently restructuring the business with a focus on improving brand prioritisation and investment, and reducing overhead costs.