TSRYY Treasury Wine Estates Ltd (PK)

By Robb M. Stewart 

MELBOURNE, Australia--Australia's Treasury Wine Estates Ltd. is making another big run at the U.S. market, after overly rosy estimates about demand there a few years ago led it to famously dump thousands of gallons of unsold inventory.

Now Treasury, the world's eighth largest wine producer by volume according to data provider Euromonitor International, is focusing on pricier wines in the $10 to $100-plus range per bottle, rather than popular but cheaper wines like its $6 a bottle White Zinfandel. It has also ditched marketing staples such as close-ups of bottles against stately vineyard backdrops, instead spending millions of dollars on a campaign for its Beringer brand featuring postcard-style images launched first on Instagram.

The campaign is Treasury's latest move in the important U.S. market, which nudged ahead of France as the leading wine consumer in 2013. Americans accounted for 15% of the $223.27 billion in reds, whites and roses consumed last year, according to Euromonitor.

Some observers are skeptical.

"Beringer is fundamentally a commercial, mass-market brand," said Daniel Mueller, an analyst at investment-research firm Morningstar. While investing in the label is positive, it will be a "long slog" building up its image, he said.

Beringer, which is best known for its mass-market offerings, suffers from a lingering hangover in the U.S. after the company in 2013 was forced to destroy thousands of gallons of wine that had passed its drink-by date, after overestimating demand for its lower-priced wines. That cost it about A$150 million.

Treasury also faltered in a recent foray into low-calorie wine with the Skinny Vine brand in the U.S. During that campaign, Treasury invited consumers in a YouTube video to take a taste test to see if they could distinguish between the low-calorie product and regular wine. But the wines faced tough sledding because they were seen as compromising on an indulgence, and Skinny Vine was discontinued this year because of disappointing sales.

Treasury in 2014 fended off two takeover approaches, including one from private equity giant KKR & Co. The company bet instead on a turnaround strategy proposed by a new chief executive-- Michael Clarke, hired in March 2014--who has retail experience in everything from Indian chutneys to gravy granules.

Mr. Clarke has focused Treasury on 15 brands out of a portfolio of about 80, and is pushing the company to seek earlier reads on popularity of products so unwanted bottles don't pile up.

Treasury posted total revenue for the year ended June 30 of 1.96 billion Australian dollars (US$1.42 billion), up 8.1% from a year earlier, as it swung to a profit of A$77.6 million from a year-earlier loss of A$100.9 million. Treasury in October increased its bet on its U.S. prospects when it bought most of Diageo PLC's North American and British wine operations in a US$552 million deal.

The Instagram campaign is Beringer's first major U.S. ad campaign in five years, elevating social media alongside traditional advertising such as magazines and billboards.

In the series, dubbed "Better Beckons," ad agency J. Walter Thompson Co. teamed the winemaker with Murad Osmann, a Russian photographer with 3.7 million Instagram followers, for an initial six photographs. Mr. Osmann's photographs feature his wife, Nataly, in front of such scenes as the New York City skyline and the Golden Gate Bridge.

The campaign, which focuses on several of Beringer's pricier vintages, launched in the U.S. in late October and will run through the holiday season, and is set to roll out across Asia next year.

"With digital, you know immediately if people are engaged," said Simon Marton, Treasury's chief marketing officer. The first photo garnered 200,000 "likes" on Mr. Osmann's Instagram feed in its first two weeks, according to Mr. Marton, who described that as a strong start.

While makers of spirits and beer have seized on social media in recent years, Beringer's Instagram-led campaign differed from many wine companies' emphasis on product shots, said J. Walter Thompson Creative Director Ben James.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

December 27, 2015 14:44 ET (19:44 GMT)

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