Treasury Wine Estates Earnings: Increasing Focus on Luxury, but a Moat Remains Elusive

We expect Treasury Wine Estate’s strategic focus on high-end wines and its increased geographic diversification to benefit long-term revenue growth and profitability as consumers continue to shift to higher-priced wines. Treasury has some strong brands like Penfolds and is increasingly focusing on the luxury side of the market with acquisitions like DAOU while deemphasizing the lower end with commercial wine divestments. But high inventory requirements, high cost of land ownership, intense competition (especially at lower-tier and midtier price points), and a lack of scale advantages preclude an economic moat for Treasury in aggregate.