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May 30, 2022 View:

Cognac Wine Group halts plans for separate listing of Penfolds business

Australian wine giant Cognac has officially halted plans to split its most popular wine brand Penfolds, amid tariff threats and wine bans in China, the company's biggest export market.

Image from: Internet

Vino Joy News is reporting that Treasury Wine Estates has told the press that it is officially suspending plans to take Penfolds to market separately.

Penfolds is undoubtedly Australia"s best-known wine brand. The spin-off of the Penfolds brand comes at a time when the troubled Australian winery is facing more trouble from its most lucrative market, in addition to the Covid epidemic.

The announcement came a day after the company said it had been informed that the China Wine Industry Association had applied in writing to the Chinese government to impose retroactive duties on Australian wines. This was also confirmed by Vino Joy News to Huo Xing San, Deputy Secretary General of the Wine Branch of the China Wine Industry Association.

Cognac said the written request from the China Wine Association to the Chinese Ministry of Commerce, if accepted, would affect imports of Australian wine into China in containers of 2 liters and smaller and could expand the scope of the anti-dumping investigation launched by the Chinese Ministry of Commerce in August this year.

"We have decided to formally suspend our spin-off efforts to focus on priorities, including focusing on how to trade in light of the Covid outbreak, the restructuring of U.S. companies and, in particular, responding to the Chinese Commerce Department's investigation." said Tim Ford, global chief operating officer of F&C.

This decision, along with news of a possible tariff increase, caused Cognac shares to fall 8.2% on Thursday to a near five-year low.

In April, Cognac revealed that it was considering splitting its most popular wine brand, Penfolds, into a separate, publicly traded company by the end of 2021.

Cognac has bet heavily on China in recent years as the country's growing middle class consumes more and more wine at higher prices per bottle. Cognac's annual report released this August predicts that China will be the company's fastest-growing wine consumption market in the five years to 2023, more than offsetting declines in wine consumption in some traditional markets like the United States.

As early as last month, it was reported that the Australian mining giant was interested in buying the popular brand from Fognac.

Penfolds is Australia's best-known wine brand, with some analysts saying it is valued at up to $10 billion.

However, with the Covid-19 epidemic hitting its key export markets, the threat of tariffs of up to 200% in China and the latest catastrophic wine ban, Penfolds' valuation has inevitably taken a hit.

In addition to Penfolds, Fognac also owns Beringer, Wolf Blass and Rawsons Retreat. But Penfolds contributes more than half of the Group's total revenue.