Treasury Wine Estates: China Reopening Enables Penfolds Price Increases

Import tariffs on Australian wine into China were lifted in March 2024, effectively reopening the lucrative luxury wine destination. The upshot for Treasury is an uplift in Penfolds Bin and Icon pricing of about 6% from fiscal 2025. Penfolds is subject to largely global pricing, and as the Penfolds brand remains healthy in China, increased demand is allowing a pricing uptick. Luxury wine consumption is often highly conspicuous, and the Penfolds business boasts attractive brand equity. However, we think the strong brand equity in some brands is eroded by the rest of Treasury’s portfolio, leading to a no-moat rating in aggregate.