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Treasury Wine Estates has set out how it will reorganise its business structure to operate more effectively and improve efficiency.
Shares in the Daou Vineyards owner shot up more than 16% today following the announcement.
In a stock-exchange filing today (22 April), the Penfolds maker said from 1 October it will move “to a regional operating model to strengthen execution effectiveness and improve organisational efficiency”.
The Australian wine major had signalled changes were on the horizon in December when CEO Sam Fischer announced a “transformation programme” that included a review of products, cost cuts and changes to the company’s “operating model”.
Up until now, the Treasury Wine Estates business model has comprised three core divisions: Penfolds, Treasury Americas and Treasury Collective.
The business will now be run through four regional divisions: the Americas; Australia, New Zealand and Europe; Greater China; and Emerging Markets (which includes the rest of Asia, Middle East and Africa).
In its statement, Treasury Wine Estates said the new business model would allow for “faster decision-making through proximity to consumers” and grow “the speed and effectiveness of in-market execution”.
It also said the changes will lead to the company “streamlining structure and removing duplication to deliver improved cost of doing business”.
Treasury Wine Estates said it plans to keep the “key strengths” from its present operating model, such as its “enhanced focus on luxury brands, in particular for Penfolds”.
Over the last 12 months, shares in the Australian wine major have dropped by nearly half, amid pressures on its sales in the US and China.
Two months ago, the business posted a half-year net loss after tax of A$649.4m (US$449.8m) due to an impairment on its US business.
In October, the company also pulled its guidance due to an “uncertain outlook” for Penfolds in and Treasury Americas businesses.
The group is looking to target A$100m ($66.9m) a year in cost savings over the next three financial years.
Treasury Wine Estates said today it will also implement changes to its senior management, moves that will be effective from October.
Tom King, the managing director of Penfolds, is taking on the position of chief commercial officer.
Other changes include Angus Lilley, the MD of the group’s Treasury Collective unit (which houses the group’s “premium” wine division), leading the new Australia, New Zealand and Europe region.
Fischer said: “We are reshaping TWE to drive clearer accountability for performance and to enable faster, more market-connected decision-making as a foundation for consistent depletions growth.
“Combining the deep local insight of our in-market teams with the scale and expertise of our global functions will step change in-market execution, whilst retaining our enhanced focus on Penfolds and other priority luxury brands.
“I am pleased with the progress we are making on elevating our focus on depletions
performance across our key markets, and we remain focused on continuing the improved momentum.”
Earlier this month, former Treasury Wine Estates COO Robert Foye wrote to the group’s chairman John Mullen and suggested a series of measures he claimed could double the Penfolds maker’s share price.
In a statement today, Foye said the company’s return to using geographic business divisions “is absolutely the right decision and should make the company more
focused and efficient”.
Foye, who says he is also an investor in the group, said the move should “reduce the duplication and confusion experienced by distributors and customers under the previously implemented dual-division structure”.
However, he also voiced his concern that no changes had been made to management at the operating level. The company “needs operators who know how to win in their geographies and who are externally focused on customers and consumers”, Foye added.
Other recommendations Foye laid out in his letter earlier in April included giving Asia more attention and reviewing its business in the US.
“I have developed detailed plans for each of these initiatives and will continue to actively engage with and pressure the company to improve its operating and financial performance. I will also share my ideas regularly with analysts and investors,” Foye said today.
“Treasury Wine Estates moves to “regional operating model”” was originally created and published by Just Drinks, a GlobalData owned brand.
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