TREASURY Wine Estates is continuing to lose ground in its biggest market of the Americas as an attempt to boost margins via higher prices led to a slump in sales, according to analysts.
Figures from market research firm ACNielsen show sales of TWE's wines in US grocery stores fell by 5 per cent by volume and 6 per cent by value over the 13 weeks to December 10, while overall wine sales grew by 4 per cent by value.
Morningstar analyst Nathan Zaia noted that the biggest wine group in the US, Constellation Brands, had also reported an 8 per cent fall in sales for the three months to the end of November.
"TWE appears to be trailing the US market's single-digit sales and volume growth for the 13 weeks to December," he wrote in a briefing to clients.
Although TWE's US brands selling for $US9 and above managed to grow sales by 24 per cent in value terms over the period, a move to lift the price of its cheaper brands appears to have backfired.
"While sales growth in its premium category is strong, the strategy to reduce discounting and promotions to protect margins is doing more damage to overall volumes than expected," Mr Zaia said.
"The decision to reduce promotions was made to help protect margins, but a resulting loss in retailer display slots and a lack of interaction with the consumer has seen volumes slump."
TWE chief David Dearie declined to comment on the reports yesterday, but has said that improving performance in North and South America is a "critical" priority for the company after it reported a 14 per cent drop in pre-tax earnings for the region over the past financial year.
The Americas business accounted for 48 per cent of TWE's pro-forma sales by volume over 2010-11 and 47 per cent of earnings before interest, tax and SGARA, a seasonal accounting adjustment for the value of agricultural assets.
TWE, which was demerged from brewing major Foster's in May last year, is due to report first-half earnings on February 17.
The company this week hired former Diageo executive Sandra LaDrew as managing director of the Americas business unit.
The former head, Stephen Brauer, has now been tasked with building up Californian wine label Beringer, TWE's largest brand in the US. Both Mr Brauer and Ms LaDrew will report directly to Mr Dearie.
The outperformance of higher-priced wines has been echoed elsewhere among Australian winemakers, with South Australia's Chateau Tanunda reporting a fivefold increase in US sales over the past calendar year as it concentrated on the premium $US15-$US20 price range.
The winery's US marketing efforts saw its Grand Barossa shiraz named as the fourth-best-value wine in the world by influential industry magazine Wine Spectator.
Figures from export marketing body Wine Australia showed the average price per litre of Australian wine exports rose by 1 per cent during 2011 - the first annual gain since 2007.
TWE Price at posting:
$3.60 Sentiment: None Disclosure: Not Held
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