Treasury Wine Estates Ltd (ASX: TWE) shares took a double hit during the pandemic-addled year of 2020.
First, shares in the S&P/ASX 200 Index (ASX: XJO) global wine company got walloped along with the rest of the market as panicked investors sold off everything but the kitchen sink amid a near-constant stream of alarming COVID-19 news.
Second, the company lost a valuable revenue stream after China slapped punitive tariffs on Aussie wine imports later in 2020 in retribution for the Aussie government's support of an inquest into the origins of the virus.
But time heals most wounds. And with the pandemic (and its still unproven origins) fading into history, China rescinded its Aussie wine tariffs in March this year.
While it will take some time to rebuild sales to pre-pandemic levels in China, Treasury Wine shares could enjoy some ongoing tailwinds as the company works to grow its presence in the Middle Kingdom.
Image source: Getty Images
China could help boost Treasury Wine shares
Speaking at Treasury Wine's AGM on Thursday, chairman John Mullen said:
We welcomed the news earlier this year that trade impediments were being removed on Australian wine in China. We acted quickly to establish Penfolds' re-entry and reignite the local luxury wine market.
Our rapid response was possible because of our long-standing commitment to China, which continued during the tariff period, where we maintained investment in the Penfolds brand, and a local team of more than 120 people.
Maintaining a strong brand presence in recent years has given us a solid platform for growth over the long term.
Looking back on FY 2024, Treasury Wine CEO Tim Ford added:
A significant highlight was the March 2024 removal of tariffs on Australian wine imports into China. We promptly executed our plans to re-establish our Australian portfolio into this important market with the response to date from our customers and consumers very positive, reflecting the ongoing strength of the Penfolds brand in the market.
Treasury Wine shares closed up 0.3% on the day.
Penfolds in strong demand and growing
In FY 2024, the company's luxury Penfolds wine helped drive the 12.8% year on year increase in earnings before interest and tax to $658 million. In FY 2025, management expects Penfolds to deliver low double-digit earnings growth, which should help support Treasury Wine shares over the months ahead.
And with Chinese wine drinkers said to be embracing the return of Penfolds, that target could be easier to achieve.
"We have seen the mid-autumn festival demand for Penfolds in particular really what we expected it to do, which is really positive and a proof point on how the brand has been received back in the market," Ford said after the AGM (courtesy of The Australian).
Ford added:
So, first quarter in is so far so good, and I think the policy news and the consistent flow of that information and talking to our customers they see that as only positive as sentiment should improve…
It is great to have the brand back in the market, building distribution again and they have got a real energy behind what was a very successful brand for a lot of these local Chinese businesses.
Treasury Wine shares are up 7.85% in 2024.
