Treasury Wine Estates, the world's largest pure-play wine company and owner of iconic brands such as Penfolds, Wolf Blass and Beringer, has reached outside the wine sector for its next chief executive, picking a former Kraft Foods and Coca-Cola manager to run its global wine business.
The company announced this morning that Michael Clarke would join Treasury Wine Estates as its new chief, following last year's shock ejection of former boss David Dearie.
The new CEO is a former president of Kraft Foods European business and a 12 year veteran of the Coca-Cola Company. Mr Clarke's CV does not include any direct leadership roles in the wine sector.
It is unclear if the market and investors will welcome Mr Clarke's appointment, given his lack of wine experience and whether he has the necessary skills to reverse the global winemaker's collapsing earnings in the midst of a tough trading environment across much of the world for the wine sector. It comes as Treasury Wine Estates recently issued its second profit downgrade following a poor performance by its US wine arm and continued headwinds across Australia and Europe which has crunched wine sales and group earnings.
This morning, Treasury Wine Estates also reported that its pre-tax earnings had dived 37.6 per cent to $45.8 million, while revenue remained flat, up only 1.6 per cent to $864.2 million.
Net profit was $106.2 million, up against a profit of $52.3 million in the first half last year, but included a $80.5 million tax benefit.
Mr Clarke, who will join Treasury Wine Estate in March as its second boss since the company split from brewer Foster's three years ago, has worked across a range of fast moving consumer goods companies including Kraft, where he sat on the global giant's operating board, Reebok International and Premier Foods. He is currently a non-executive director at Quiksilver.
Most recently, Mr Clarke was chief executive of the UK publicly-listed Premier Foods, based in London, where he led a significant turnaround of that company, Treasury Wine Estates said. The South African-born executive is a dual Irish/South African citizen and will be moving to Melbourne to take up his new role.
''I'm incredibly excited to have been given the opportunity to return to Australia and lead Treasury Wine Estates and its portfolio of truly iconic wine brands,'' Mr Clarke said in a statement.
''I recognise that TWE, like most companies, has its challenges but I believe the opportunities are immense and I look forward to working with my colleagues across the business to ensure that these are fully realised.''
The challenges facing Mr Clarke and Treasury Wine Estates are significant. Its first half result issued this morning showed earnings pressures across a number of fronts.
Only one of its four regional divisions showed growth in wine volumes, with all four regions reporting shrinking earnings. Its Australian and New Zealand wine arm recorded a 4.5 per cent drop in volumes and a 32.2 per cent slide in earnings to $24.4 million.
The winemaker is being hit by intense price competition on the shelves and adverse inventory levels that are expected to flow into the second half.
Asia, once the growth powerhouse of the group, reported a 17.6 per cent drop in first half volumes and a 63.7 per cent decrease in earnings to $4.9 million. Lower volumes were a reflection of austerity measures in China, partially offset by strong growth in Hong Kong.
Treasury Wine Estates said there were some positive signs emerging in its key US business, however volumes were down 12.7 per cent and earnings 27.9 per cent weaker at $24.6 million.
Sales volumes for its Europe, Middle East and Africa division rose 2.9 per cent with earnings up 81.4 per cent to $10.7 million. But in constant currency terms earnings went backward by 26.7 per cent.