Sp upgrade.......$21 Treasury Wine Estates shares tipped to hit...

Sp upgrade.......$21

Treasury Wine Estates shares tipped to hit $21 thanks to zombies
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Treasury chief executive Mike Clarke is overseeing a big shift in 15 states in the US in the way Treasury distributes wine.

Millennials in the United States enthralled by augmented reality technology on wine labels where they can visualise zombies crashing out of wine bottles through their smartphones have led to one analyst predicting Treasury Wine Estate shares are headed to $21.

Bank of America Merrill Lynch analyst David Errington has lifted his 12-month price target on Treasury, the maker of Penfolds and Wolf Blass, to $21 from a previous $18 on the strength of a booming Australian grape harvest and strong sales in the US from brands targeted at a younger age group such as 19 Crimes and The Walking Dead. Treasury shares are up 50 per cent in the past 12 months and were at $17.65 at noon on Monday.

Mr Errington on Monday upgraded his profit forecasts for 2019-20 by 9 per cent and by 12 per cent for 2020-21 because of a better-than-expected Australian grape harvest which has just finished in major grape-growing regions in Australia, along with the marketing sizzle in the United States.


He expects net profit before one-offs to reach $678 million in 2019-2020, up from a predicted $481 million in 2018-19, and $367 million in 2017-18. The high-end Penfolds brand will be a major beneficiary of the "optimal ripening conditions" in the main regions of the Barossa Valley, McLaren Vale and the Limestone Coast in South Australia.

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A partnership with the firm behind the The Walking Dead TV show has helped fuel Treasury Wine's US sales. Alan Clarke/AMC
He pointed to the company's 19 Crimes brands which has grown to generate annual sales of around 1.5 million cases of wine in the United States in less than three years, and labels such as The Walking Dead, which have both used augmented reality campaigns which have been big successes with a younger demographic.

The Walking Dead is a popular US cable television series and Treasury struck an agreement with the production company behind it, Skybound Entertainment.

Living Wine Labels
The labels use the "Living Wine Labels" app, which has been downloaded by 1.3 million people. Treasury has a range of wines with "labels that can talk and play out stories on customers' phones", after they line them up against the label, Mr Errington said.

Mr Errington said the big success of that marketing drive, which has just won an award called the Super Reggie in the US for the best augmented reality campaign, gave extra confidence that Treasury would succeed in the US with it's "re-defined go-to-market distribution model".


Treasury chief executive Mike Clarke is overseeing a big shift in 15 states in the US in the way Treasury distributes wine, with a substantial overhaul and revamp of distributors which was announced in late January.

The "Living Wine Labels" app had been an important driver in US sales. "This app has been particularly powerful marketing the 19 Crimes brand, as well as the other brands included in the Augmented Reality Technology," he said. The other brands included The Walking Dead, Gentleman's Collection, Beringer Bros and Chateau St Jean.

Treasury's chief marketing officer Michelle Terry said 19 Crimes had played a "critical role" in driving customer engagement and loyalty.

Mr Errington said the strong grape harvest in 2018 would deliver a robust lift to future profits, and followed the 2016 and 2017 harvests which were "outstanding in their quality and volume".


Those very good vintages were also now benefiting from a program to strip extra costs out Treasury's supply chain in Australia and may also result in the prospect that the company may release more higher-end wines from previous vintages during 2018-19, because there was now no longer any need to hold back wines as insurance against the 2018 vintage having potentially been lower in volume.