Earnings before interest and tax dipped ever so slightly to $357.3 million, but that accounted for a whopping two-thirds of Treasurys total group profit. And most impressively, Penfolds EBIT margin grew from 45 per cent to 47 per cent.
That actually compares pretty nicely to Burberrys EBIT margin in 2020 of 17.8 per cent, the 23.9 per cent EBIT margin at Kering (which owns a swag of luxury brands including Gucci, Yves Saint Laurent and Balenciaga) and the 18.6 per cent margin at LVMH, owner of Louis Vuitton, Moet and Hennessy.
But Fords plan is to give up a bit of that margin to drive growth in a world where Chinas thirsty consumers are no longer filling Treasurys coffers.
The long-term goal is to have margins sitting between 40 per cent and 45 per cent. That will allow Treasury to invest in distribution to get the wine thats no longer going to China in front of luxury consumers in other parts of Asia, the United States, Europe and, of course, Australia.
That is the most wonderful opportunity that we have never had before, Ford says, putting what some might see as a historic spin on the fact he must now find new homes for the wines that previously went to China.
We have to build demand, and as a business thats what youre here to do. Every week, every month, every quarter weve got to build distribution to build demand.
Using e-commerce channels particularly ones where other luxury brands are prominent will be part of this.
Increasing sales direct to collectors around the world is another angle. But the keys to recruiting more customers will be getting Penfolds into restaurants and bars and independent retailers; these channels were not a focus during the China boom, but theyre about to get plenty of love.
That process will start with Australia, where Ford admits the company has work to do. When China was in full swing, Treasury focused on big Australian retailers and neglected the independents.
As Ford works to reverse that, he admits there is some cynicism in the Australian market with what Id call the independent retail base, which he says is giving him a common response: Oh, you need us again, do you?
Ford understands that, but he claims Treasurys Penfolds plan is one that will remain in place for 15 to 20 years.
Even if things change in China in the future, we will stay the course in these other markets. Its a very, very big shift in mindset.
Were not hiding from the fact were coming from a fair way back here. [But] we want everyone to know we are back in this country.
Lifting sales of Australian-made Penfolds in Australia is one challenge, but Ford is also pushing ahead with his plan to lift sales of Penfolds-branded wine made from grapes grown in California and France and made using Penfolds methods.
These country-of-origin wines have two purposes. First, they increase the amount of Penfolds wine Ford has to sell across the globe.
But they also provide a way for Penfolds wine to remain in the Chinese market albeit not the Australian stuff those consumers fell in love with.
Its a strategy not without some risk, but the reception to the first batch of Penfolds wines from California which has price points from $US50 to $US700 a bottle has given Treasury confidence it can work.
Time will tell if Chinese consumers do as they do with Gucci buy the label and not worry about where the materials were made.
The obvious question is whether the organisational restructure makes Penfolds ripe for demerger; while its not in Fords immediate plans, its likely to be a question that keeps coming up.
On its own, Penfolds might be a $10 billion business but whats Treasury really worth without it?
At the very least, the new structure gives Ford options and some breathing space to recover from his big Chinese burn.