Treasury Wine Estates settles dispute with RNDC over California exit
Treasury Wine resolves RNDC dispute, stabilising U.S. operations and raising half-year earnings expectations.
USA – Treasury Wine Estates (TWE) has announced that it has reached a settlement with U.S. distributor Republic National Distributing Company (RNDC), bringing an end to a dispute triggered by the distributor’s withdrawal from California operations.
The agreement closes a conflict that began in June last year, when RNDC announced it would exit California, a move that disrupted Treasury Wine’s distribution in one of its most important U.S. markets. The Melbourne-based wine group had spent several years building its presence in the state.
Under the settlement, Treasury Wine will acquire inventory from its Treasury Americas and Treasury Collective portfolios at the original purchase price. This amount will be adjusted by a confidential sum to compensate RNDC for losses incurred as a result of the closure, according to Reuters.
Bloomberg reported that the net cash requirement for the half-year ending June is expected to reach US$65 million.
Chief executive Sam Fischer said the company welcomed the resolution after the disruption caused by RNDC’s departure. “We are pleased to have reached this resolution,” Fischer said, adding that the distributor’s California exit had a “significant impact” on Treasury Wine’s recent performance.
Alongside the settlement announcement, Treasury Wine upgraded its earnings outlook for the six months ending December. The company now expects earnings before interest and taxes of approximately AU$236 million, compared with its earlier guidance range of AU$225 million to AU$235 million.
The resolution comes at a time when Treasury Wine has been facing broader challenges in its international operations.
The company has struggled with weaker-than-expected performance in China, where changing consumer preferences have reduced demand for premium wines that underpin the Penfolds portfolio.
In December, Treasury Wine recorded a AU$687.4 million non-cash impairment related to its American operations and suspended the remainder of its share buyback programme.
RNDC is one of the largest wholesale distributors of wine and spirits in the United States. Its decision last month to explore the sale of operations in seven states prompted concerns among analysts about potential earnings risks for Treasury Wine, which relies on RNDC distribution in at least five of those markets, according to Reuters.
Sign up HERE to receive our email newsletters with the latest news and insights from Africa and around the world, and follow us on our WhatsApp channel for updates.
