Michael Clarke said commenting on the results: “While the first half of fiscal 2015 included the benefit of the successful transition of the Penfolds release date, we have also progressed with our overarching strategic initiatives to reset the business by significantly increasing investment in our brands – particularly focused on Penfolds depletions during the first quarter of fiscal 2015 – removing excess costs, addressing the structural challenges within our portfolio, fixing the quality of our base business, and taking initial steps to optimise our capital base.”
Consistent with TWE’s strategic priority to address underinvestment in brands, consumer marketing investment increased by more than 50 per cent relative to the prior period and was focused on Luxury and Masstige brands across all regions.
Also during the period, TWE adopted a new, globalised marketing model, which is expected to bring focus and discipline to the way consumer marketing dollars are allocated and invested in the business. Under this centralised marketing model, J Walter Thompson has been engaged and, in partnership with TWE, will be responsible for embedding a global brand portfolio strategy and stewardship; ensuring consistency from global strategy to local execution.
Specifically, TWE’s ANZ business reported EBITS growth by 84.5 per cent. TWE says this growth was driven by favourable portfolio mix, execution of the 2015 Penfolds October release and wine cabinet promotion, lower overheads, partially offset by an uplift in consumer marketing investment and continued heightened levels of competition in the concentrated, retail landscape.
TWE’s commitment to reduce overheads by $35 million in fiscal 2015 is on track, the company says.
Despite having a very rich inventory composition available for sale in fiscal 2015 however, TWE continues to face both category and portfolio challenges in some regions, which the company says shows the need for TWE to expedite its separate focus on Luxury & Masstige and commercial segments, globally.
Michael Clarke said commenting on these challenges: “The growth of private and exclusive labels in concentrated retail markets, notably Australia and the UK, places pressure on branded wines, with private and exclusive Label growth in Australia currently outpacing branded wine in both percentage and absolute dollar terms.
“The operating environment in Australia, where approximately 75 per cent of off-premise wine purchased is through a limited number of retailers, reinforces the need for TWE to reshape, at a global level, its go-to-market strategy and portfolio and to consider how best we allocate precious resources in the future”.
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