Britons struggling to cope with the rising cost of living are unlikely to refrain from a glass of wine on the sofa in the evening, according to the chef of Australia’s largest listed wine producer.
Tim Ford, managing director of Treasury Wines Estates, which owns brands such as Penfolds, Wolf Blass and Lindeman’s, said rising global inflation and rising household spending were putting pressure on the bottom of the wine market .
But in the UK, where inflation hit a 40-year high of 10.1%, Ford said there was no sign consumers were cutting back on wine spending. “We haven’t seen this change in the UK. The price of £6-8 a bottle continues to be quite steep,” he said.
Ford predicted that at-home consumption of low-end wine would prove resilient. “That pandemic trend has really stuck,” he said, referring to how people started drinking more at home after pubs and bars closed due to lockdowns.
Phillip Kimber, consumer analyst at E&P Financial Group, said during the pandemic and the 2008 financial crisis, in many markets, including the UK, home drinking increased. “Supermarket sales have gone crazy,” he said.
However, Kimber warned that the business was not recession proof as higher-margin wines sold in bars and restaurants were in less demand. “During a severe recession, the corporate credit card is dampened and premium wine spending is impacted,” he said.
Ford said Treasury Wine Estates would not raise prices for cheaper brands because the market could not absorb the higher cost, although the winemaker has raised prices for some of its popular luxury and premium brands. “It’s not just lazy price hikes. We can only do that where the demand exists,” he said.
TWE suffered a devastating blow when China introduced punitive tariffs on the Australian wine industry in November 2020. China was its most lucrative market at the time, and the company was forced to restructure and downsize its costs to deal with the impact of tariffs.
TWE’s annual results for the year ending June 2022 showed pre-tax profit rose just over 4% to A$372.9 million ($259 million).
The business grew in the second half as its plan to target US, UK and non-Chinese Asian markets, including Thailand, Malaysia and Singapore, came to fruition. “It’s been an exciting year, geopolitics aside,” Ford said.
TWE has maintained a presence in China and will premiere a Chinese version of Penfolds next month. Shares of TWE rose 4% after the results.