The Treasury Wine Estates Ltd (ASX: TWE) share price could not escape the market sell-off even as it executes on a plan to by-pass punishing Chinese tariffs.
Shares in the winemaker fell 0.9% to $11.10 in morning trade, although shareholders can consider that a win.
Treasury Wine share price looking fortified
The weakness isn’t as bad as the 1.9% plunge by the S&P/ASX 200 Index (ASX: XJO). That’s caused by a meltdown on Wall Street overnight, which suffered its worst one-day fall in nearly two years.
The Treasury Wine share price is even holding on better than other ASX staple shares. The Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW) share prices have fallen between 2% and 4% each.
Penfolds getting revived in China
The optimism towards Treasury Wine comes on news that it is launching a wine made in China aimed at the 52 million regular wine drinkers in the country, reported The Australian.
The wine, which will be sold under the Penfolds name and marketed as an entry-level luxury product, will not be subject to Chinese tariffs. The Company is pricing the new offering at between $30 and $50 a bottle and will be released later this year.
But Aussies are unlikely to be given a taste as Penfolds China is only meant for that market – at least for now.
Treasury Wine share price boosted by renewed revenue stream
The excitement towards Treasury Wine’s share price is understandable. The Asian giant’s punitive tax on Australian wine had effectively brought many local vineyards to their knees.
Treasury Wine took a big earnings hit from the trade war. It came at a time when its Australian Penfolds product was gaining popularity among Chinese drinkers.
The company doesn’t believe that its brand has been damaged in the eyes of Chinese consumers by the trade friction.
The chief executive of Treasury Wines, Tim Ford, said:
As a leading global wine producer, we have a responsibility to help build the wine category and industry in our different markets. The Penfolds brand continues to be strong among consumers in China, and sharing our global expertise is part of our ongoing investment in our local team, our brands, customers, consumers, partners and the broader industry: that’s what long-term commitment to a market really means.
Where grapes are being sourced
While sourcing grapes from other countries is nothing new for Treasury Wines, using Chinese grapes could surprise some. China may have a long history of making alcohol that dates back to 2,600BC, but the country isn’t known to be a wine growing region.
The first batch of Penfold China wine will come from grapes grown in the Ningxia region in the North. Treasury Wines is working with other Chinese vineyards to expand production.
The Treasury Wine share price has traded 1.5% higher over the past 12 months, which is in line with the ASX 200.