India's First Wine, Food and Hospitality Website, INDIAN WINE ACADEMY, Specialists in Food & Wine Programmes. Food Importers in Ten Cities Across India. Publishers of delWine, India’s First Wine.
Skip Navigation Links
About Us
Indian Market
Wine & Health
Wine Events
Retail News
Contact Us
Skip Navigation Links
Wine Tourism
Book Review
Photo Gallery
Readers' Comments
Video Wall
Media Partners
Ask Wineguyindia
Wine & Food
Wine Guru
Gerry Dawes
Harvest Reports
Mumbai Reports
Advertise With Us
US Report on Indian Market Released
Top Ten Importers List 2015-16
On Facebook
On Twitter
Delhi Wine Club
Treasury to dump $30m wine in US Drains

Posted: Wednesday, 17 July 2013 14:12

Treasury to dump $30m wine in US Drains

July 17: After a deluge of reports last weekend indicating that the Treasury Wine Estate, the biggest Australian wine company in revenues, will write off $140-160 million worth of wine in the US, the new estimates talk of draining only $35 million worth of wine, an unthinkable option in the Indian scenario because of the high customs duties involved, writes Subhash Arora

In a Statement, Treasury Wine Estates says it's planning to get rid of excess, old and deteriorating inventory in the U.S. since it was unable to sell the wine as fast as planned. The wine was stored in warehouses for months, possibly even years. "We remain committed to providing trusted and iconic brands for our loyal consumers, and this commitment has resulted in our decision to destroy old and out-of-date product in the U.S.," said the company's CEO, Dan Dearie, in a press release.

The company is also offering up to another US $35 million in discounts and rebates to its distributors to ensure it can get its excess capacity out in the retail shelf space as quickly as possible.

A break up of wine sales in the USA as of June 2013 indicates that 25% of the market is for those costing less than $5 including boxed wines. Maximum share is that of wines selling between $5-8 (27%). Another chunk is consumed at the mid-level wines (16%) costing $11-15. A small population (6%) drinks mid to high-end wines. Only 4% of the wines consumed are over $20.

Most of Treasury's sales in the US are in the low-priced segment even though American tastes are gradually shifting to better (read more expensive) wines. US retail store sales of wine bottles priced between $3 and $5.99 went up only 1.5% and bottles priced $6 to $8.99 actually dropped 3.3% in the 52 weeks ended May 25 in volume terms, according to Nielsen, as reported by Wall Street Journal. By contrast, volumes of bottles priced $9 to $11.99 and $12 to $14.99 rose 13% and 9%, respectively, and those above $15 increased more than 6%.

Total U.S. wine consumption rose 2.2% last year, reaching 345.1 million 9-liter cases, and rose 3.6% to $32.3 billion in retail sales, according to Technomic. But for Treasury Wine, the No. 5 player in the US, American sales slipped 1.9% by volume, while those of market leader E & J Gallo Winery rose 3.5% according to estimates. Treasury Wine's sales in the U.S. slipped below 13 million cases last year from 16.5 million in 2009, according to WSJ.

It is perplexing to note which wines are to be drained and written off. While most media is referring to the wines being cheap, low-ended young wines which spoil after a couple of years of harvest, the figures of a million bottles earmarked would indicate the average value of $35 a bottle, by no means cheap or non-age worthy wines as the media infers.

Rohit Mehra, importer of Penfolds, Rosemount and Lindeman’s (Wolf Blass is imported by Pearls and the American Beringer and Stags Leap are imported by Aspri in India), who imports 7,000-9,000 cases of these wines annually had no clue and had also read the media reports only. However, he emphasised that there is no question of such a situation arising in India. For one, the volumes are very low. Besides, it would not be feasible to drain off wines just like that in India - the Customs rule make it mandatory: drink it or drain it, but first pay the customs duty of 150%. ‘We pay interest every quarter on the duty payable on the unsold wines left in the warehouse. Though the bond is good for one year, importers of good standing are able to extend the bond for another year by paying the interest on duties. If we are unable to sell, we have to de-bond the wines by paying duties or we must re-export even if it means dumping in the sea rather than draining in the gutter.’

Dumping in the sea would not be helpful to a producer like Treasury. If it is drained in public view, the wine cost may be written off, according to American experts. Such unsalable wine could also be distilled but the costs, especially after the bottling, far outweigh the recovery benefits, hence draining off might be the best solution. It is not clear why it could not be given away at special, one-off heavy discounts. Obviously, if the wine has gone bad, it would result in a bruised reputation.

This is not the first time that Treasury had to suffer this ignominy. In 2011, a sum of $1 billion was written off when the wine division was spun off the erstwhile Fosters.

Tags: Australia, USA, Treasury Wine Estate, Penfolds, Rosemount, Lindeman’s , TWE


Want to Comment ?
Please enter your comments in the space provided below. If there is a problem, please write directly to Thank you.

Generate a new image

Type letters from the image:

Please note that it may take some time to get your comment published...Editor

Wine In India, Indian Wine, International Wine, Asian Wine Academy, Beer, Champagne, World Wine Academy, World Wine, World Wines, Retail, Hotel


Copyright©indianwineacademy, 2003-2020 |All Rights Reserved
Developed & Designed by Sadilak SoftNet