SYDNEY–It is unusual for a seller of premium wine to throw in discounts on goods such as refrigerators and televisions. For Australia’s Treasury Wine Estates Ltd. , however, this marketing strategy appears to be working.
Treasury Wine, the world’s biggest listed vintner after Constellation Brands Inc., on Friday said revenue in the six months through December rose 8% from a year earlier. Operating profit, which strips out interest and tax expenses, jumped by 86% to 85.2 million Australian dollars (US$66.4 million), even as net profit more than halved due to the absence of a major tax benefit it enjoyed last time around.
The stronger turnover was partly the result of new marketing campaigns focused mainly on higher-end labels–including the offer in July of 69% discounts on wine fridges with the purchase of six bottles of its upmarket Penfolds range. Treasury Wine ended up subsidizing the sale of 12,000 such fridges in Australia alone, but the discounts helped sell significantly larger quantities of the label there. It has since brought the initiative to six other countries.
The company has rolled out similar deals on mass-market brands such as Wolf Blass, offering customers steep discounts on LED TVs to coincide with Treasury Wine’s sponsorship of the Cricket World Cup in Australia and New Zealand.
The higher half-year revenue figure of A$934 million, helped by a weaker Australian dollar and the retiming of Penfolds releases to near Christmas, may not appear all that dramatic. It should come as a relief, however, to a company that has wrestled with several major setbacks in recent years, particularly in the U.S. market, that have weighed heavily on earnings.
Chief Executive Michael Clarke, a former Coca-Cola Co. executive, has spent the past few months slashing corporate spending, while ramping up the vintner’s marketing budget to help turn around the company’s performance. “I’m keen to get my sales and marketing team to get away from lazy marketing and lazy selling,” Mr. Clarke said in an interview Friday. “Anybody can do price-off.”
He said the Penfolds offer had the added benefit of encouraging more customers to begin cellaring wine, boosting the opportunity for a longer-term relationship with them.
Mr. Clarke said he was considering more such marketing efforts, adding that the company would sell some assets-like vineyards, which could then be leased back-to help free up funds for a range of other options. “It could be investing in brands, it could potentially be in acquisitions, or it could be returned to shareholders,” said Mr. Clarke. “We don’t need to own all the infrastructure that’s involved in winemaking.”
The Melbourne-based company has faced difficulties ever since it was spun off in 2011 from Foster’s, which was later bought by SABMiller PLC. In 2013, a particularly bad year for the company, Treasury Wine vastly overestimated U.S. demand for its Beringer mass-market label and ended up having to destroy thousands of gallons that had passed the sell-by date.
That faux pas led to a large write-down that hastened the departure of its former chief executive, David Dearie, later that year. It also sent the company’s shares into a tailspin, attracting two failed takeover bids from private-equity firms last year.