Australian wine giant Treasury Wine Estates has officially halted its plan to demerge its most popular wine brand, Penfolds, as its biggest export market China mounts tariff threats and wine ban.
The news was announced by TWE’s CEO Tom Ford today.
“We have decided to formally pause work on a demerger to focus on key priorities including trading through Covid, the U.S. business restructuring and most specifically the Mofcom investigation in China,” says Ford.
The pause of the Penfolds label spinoff comes at a time when the troubled Australian winemaker faces more woes from its most profitable market than ever, on top of Covid.
The news was announced just after it’s been confirmed that the China Alcoholic Drinks Association (CADA), the country’s official drinks trade association, formally submitted a written request to the Chinese Ministry of Commerce to impose retrospective tariffs on Australian wines amid the ministry’s twin investigations on Australia’s alleged wine dumping and subsidy.
TWE said earlier it would make an official statement if the request was accepted by the ministry.
The decision, along with the threat of more tariffs, has caused the company to suffer an 8.2% fall in share price to near five-year lows on Thursday.
As early as last month, Australian mining magnate was eyeing to buy the popular brand off from TWE.
Penfolds, the most known wine brand from Australia, is estimated by analysts to worth as much as AU$10 billion.
However, with the onslaught of Covid-19 in its key export markets, China’s tariff threats that could be as high as over 200% and the latest catastrophic wine ban, Penfolds’ valuation is inevitably affected.
TWE owns other brands such as Wolf Blass, Beringer, Rawson’s Retreat but Penfolds contributes to over half of the group’s overall earnings.