Last year, the country's number two player, Accolade, flirted with bankruptcy before being taken over in an emergency by a consortium of private equity funds.
The culprits: after Covid's nuclear winter came the Chinese tariffs imposed on Australian wine - two back-to-back 'black swan'-type events, deadly in a context of structurally declining volumes and waning consumer interest in entry-level wines.
Today, it is Australia's number one, Treasury Wine Estates, which has announced an asset impairment of almost half a billion US dollars on its assets in the United States. That figure represents half the amount put on the table to buy DAOU Vineyards in 2023.
Two years earlier, precisely to sidestep Chinese tariffs, Treasury had already acquired Frank Family Vineyards for $315m.
In Sydney, the news sent Treasury Wines' share price back to the level it was trading at exactly ten years ago. The speculative fever between 2015 and 2019 - Treasury's market capitalization then quadrupled in four years - now seems a very long way off.
Here, the market is punishing the completed failure of a bold external-growth strategy that had in fact begun back in 2016 with the nearly $600m acquisition of Diageo's wine assets in the UK and the US.
This series of acquisitions has weakened the balance sheet and led to significant dilution, without any impact on cash profit - or free cash flow - which last year was equivalent to its level ten years earlier. Nor did it manage to halt the growth problem. The destruction of value was therefore very real.
Even so, Treasury Wines has managed to return $1.9bn to its shareholders, including $1.5bn in dividends. This performance should be measured against a market capitalization which, even after its recent tumble, still stands at $3bn, and an enterprise value of $4.2bn.
Like Rémy Cointreau and Laurent Perrier, Treasury is now also trading at its book value. Some board members have seen this as an opportunity to buy shares on the market in recent weeks.
Investors looking to bet on a rapid rebound in the wine market in Australia and the United States might want to follow suit, all the more so with the Australian dollar currently trading at its historic lows against the US dollar.
Indeed, even though its solvency ratios have been weakened by the recent asset impairment, Treasury Wines remains adequately capitalized and, in principle, more than capable of covering its interest burden.
However, the refinancing deadlines in 2026 and 2027, while manageable, will undoubtedly come with far tougher terms than in the past. In this respect, MarketScreener analysts believe that the group's shareholders will not escape a very near-term cut to the dividend.
