Britons struggling to keep up with the rising cost of living are unlikely to abstain from a glass of wine on the couch in the evening, according to the head of Australia’s largest listed wine producer.
Tim Ford, chief executive of Treasury Wines Estates, which owns brands including Penfolds, Wolf Blass and Lindeman’s, said rising global inflation and higher household expenses were putting pressure on the lower end of the wine market.
But in UK, where inflation has climbed to a 40-year high of 10.1 per cent, Ford said there was no sign that consumers were cutting back on wine spending. “We haven’t seen that shift in the UK. The £6-£8 a bottle price point continues to be pretty strong,” he said.
Ford predicted that at-home consumption of lower-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 were closed because of lockdowns.
Phillip Kimber, a consumer analyst with E&P Financial Group, said that during the pandemic and the 2008 financial crisis, in many markets, including the UK, consumption of alcohol at home increased. “Supermarket sales went crazy,” he said.
However, Kimber warned that the company was not recession-proof, as higher-margin wines sold in bars and restaurants were less in demand. “In an acute recession, the corporate credit card gets reined in and spending on premium wines gets hit,” he said.
Ford said that Treasury Wine Estates would not raise the prices of cheaper brands as the market could not absorb the higher cost, though the winemaker has raised prices for some of its popular luxury and premium brands. “These are not just lazy price rises. We can only do it where 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 cut costs to deal with the impact of the tariffs.
TWE’s full-year results for the year ending June 2022 showed pre-tax profit increasing just over 4 per cent to A$372.9mn ($259mn).
The business grew in the second half as its plan to target the US, UK and non-Chinese Asian markets including Thailand, Malaysia and Singapore took hold. “It has been an exciting year, geopolitics aside,” said Ford.
TWE has maintained a presence in China and will introduce a Chinese version of Penfolds next month. Shares in TWE rose 4 per cent following the results.