Treasury Wine Estates (ASX:TWE) announced to the ASX on Tuesday that it will make significant changes to its supply chain network in both the US and Australia. The goal of the supply chain change is to optimise savings and to shift more focus onto Luxury & Masstige products versus Commercial portfolios globally.
Production at TWE’s Asti winery in Sonoma Country, California will be transferred to other wineries within the company’s network due to a surplus in production needs. Packing lines at the Napa Bottle Centre will also be consolidated to further optimise production efficiency.
In Australia, Treasury Wine Estates will transfer the packaging and warehousing of wines at Karadoc near Mildura Victoria to the state-of-the-art Wolf Blass facility in the Barossa, South Australia. Commercial wine processed at the company’s Great Western and Wynn’s Coonawarra sites will be transferred to the Karadoc site. The processing of Masstige wine at the Great Western and Wynn’s Coonawarra sites will be transferred to Wolf Blass. All of these movements are an effort by the company to focus on fewer brands.
Treasury Wine Estates will also be selling the T’Gallant, Baily’s and Ryecroft wineries in Australia. This will be a $50m write-down across the board in an effort to reduce costs. The changes to the supply line will also result in layoffs. Treasure Wine Estate chief executive Mike Clarke said the cuts were necessary to fund some much needed advertising and marketing. Although production and sales have been struggling, particularly in the US market, shares of TWE have advanced 46.88 per cent in the last 12 months, although it is still below its all-time high of $6.11 that it reached in May 2013.