Tag Archives: Treasury Wine Estate

Winebits 373: Big Wine, Treasury, direct shipping

Big Wine ? How big is big? One of the most difficult concepts to get consumers to understand is that their wine probably isn’t made by who they think it is. As noted here, Big Wine controls a majority of the U.S. market, and Big Wine includes many companies most of us have never heard of. Case in point: Trinchero Family Estates, a 20-million case producer that wants to be a 30-million case producer. And how many of us have heard of Trinchero, a California company? It’s best known for Menage a Trois and Sutter Home, but those are only a fraction of Trinchero’s production and its three dozen brands. If Trinchero makes it to 30 million cases, it will be as big as the entire U.S. wine business was in 1965.

? Now they’ve figured it out: Regular visitors may remember the Wine Curmudgeon’s attempt to cash in on Treasury Wine Estate’s financial woes, which — not surprisingly — failed. One reason, aside from my lack of financial acumen, is that the people running Treasury were a little confused about how to sell cheap wine. Luckily for the company, that seems to have changed, and its results in the U.S. are much improved. Ironically, it seems this success came from a formula that I suggested when I wrote abut Treasury’s problems last year. Not that the company needs to give me credit — I’m used to saving really rich people lots of money.

? The judges like their wine: Supreme Court Justice Ruth Bader Ginsburg made a bit of news last week when she admitted she fell asleep during the State of the Union address in January because she had too much wine. This got giggles from many, but they missed the point, focusing on Ginsburg’s age, 81. Rather, it points to the real reason the court ruled in favor of direct shipping in 2005 in the landmark Granholm decision, which surprised many observers. Forget precedent and constitutional interpretation; the Supremes carved out an exception to the three-tier system because they liked wine and wanted to be able to have it shipped legally from their favorite California wineries. How else to explain that Ginsburg, Anthony Kennedy, and Antonin Scalia, all referred to in the BBC story in the first link, voted to allow direct shipping?

Winebits 347: Ordering wine, Big Wine, Treasury wine

ordering wine ? What does it say that this is even necessary? The Daily Meal website offers advice on “How not to sound stupid when ordering wine,” the need for which makes the Wine Curmudgeon cringe. But it’s mostly good advice, and I will likely borrow some of it when I revise the cheap wine book. My favorite of the six: “Tell the server how much money you ?re comfortable spending. It ?s their job to point out a wine or wines you ?ll enjoy that fit your budget.” The catch, of course, is that too many restaurants spend as much effort on server training as I do preparing to run the marathon in the Olympics.

? There’s Gallo, and there’s Gallo: The blog has spent much time discussing how Big Wine dominates the wine business, but never with quite this much humor. Marnie Old at Philly.com points out that someone who doesn’t want to drink an E&J Gallo wine often ends up drinking it anyway (and is even nice to Gallo in the process, which one rarely sees on the Internet). By her reckoning, 15 of the most recognizable grocery store brands are Gallo, dating to the 1970s.

? Bring on the bidders: Regular visitors here know that the Wine Curmudgeon is trying to finance his retirement to Burgundy by buying low on ailing Treasury Wine Estates and pockting zillions after the company is taken private. The good news is that it looks like a third private equity group wants to bid for Treasury. The bad news is that the stock price still isn’t going anywhere, and I may not even get a bottle of Burgundy out of this. I’m also starting to feel a little guilty, since the new owner will fire thousands of people, pay off the executives who ran Treasury into the ground, and give themselves huge bonuses for doing the deal. It’s hell being sensitive when money is involved.

Treasury Wine Estate’s plan to avoid a hostile takeover

Treasury hostile takeoverThe Wine Curmudgeon mentions Treasury’s scheme for two reasons. First, and most importantly, it doesn’t seem very sustainable. The troubled Australian multi-national wine company, whose holdings include California’s Beringer, has been losing more millions than most of us have socks.

Yet, despite its problems, Treasury wants to boost business to fend off a hostile takeover from private equity firm Kohlberg Kravis Roberts, which tried to buy Treasury earlier this year and made another offer this week. The second offer was a little higher, but probably won’t scare anyone.

Treasury’s anti-takeover plan features selling heavily discounted wine refrigerators to customers in Australia. The Brisbane Times newspaper reports that the company’s new boss “labelled the wine cabinet promotion the biggest consumer-facing promotion ever undertaken by the company.” Which should tell us all we need to know about Treasury’s lack of marketing ability.

How does it work? Buy six bottles of a Penfolds Bin wine, which cost from AU$30 to AU$80 a bottle, and you can buy a AU$650 wine fridge for AU$200. In other words, buy six bottles of AU$30 Penfolds Bin 51 Eden Valley riesling and the refrigerator and pay AU$380 — just 58 percent of what the refrigerator would cost by itself. Given retail discounting, in fact, you could probably get the fridge for at least 50 percent off. Is it any wonder that Treasury wrote down AU$260 million earlier this year and fired its CEO?

The second reason I mention this? The Wine Curmudgeon, financial genius that he is, bought 100 shares of Treasury stock in hopes KKR (as we high-flying investment types call Kohlberg Kravis Roberts) would make another, much higher offer for Treasury. My retirement to Burgundy never seemed so close.

I paid about what KKR offered the first time, so news that Treasury seems to be throwing away money on the refrigerator promotion is not welcome. The company is reducing inventory and margins to increase cash flow, which will not boost its value or make me rich. KKR’s second, not much higher, offer confirmed this.

In the wine business, the old joke always seems to apply. Or, as one actual real-life financial type told me: “With a little luck, you might get a nice bottle of wine out of this.”