Miscalculating the US wine market has had a $39 million sting in the tale for the world’s biggest winemaker, as Treasury Wines Estates settled a class-action lawsuit this week.
The suit was filed in 2014 after Treasury announced a surprise $151m writedown of its US operations, causing a sharp fall in its share price. Investors sued, claiming that Treasury had released an unrealistic profit guidance in late 2012 and that the subsequent writedown was foreseeable.
The profit guidance was met, but only after massive oversupply of Treasury product into the US market, which caused a glut of inventory on distributors’ shelves. In the end, the company discounted stock heavily, before eventually destroying 18m bottles at a cost of $30m.
The exercise caused a steep drop in the company’s share price, which made Treasury vulnerable to two subsequent takeover attempts by private equity firms. Treasury’s chief finance officer, chief information officer, chief sales officer and chairman of the board were all dismissed within six months.