For Vintner, $145 Million of Wine Down the Drain

(WSJ) - One of the world's biggest vintners has a roaring hangover from poor U.S. sales, leading it to destroy thousands of gallons of wine past its prime.

Treasury Wine Estates Ltd.— whose brands range from the mass-market, U.S.-made Beringer up to $1,000-a-bottle Penfolds Grange from Australia—said it would book a charge of 160 million Australian dollars (US$145 million) against its U.S. business for the fiscal year that ended June 30.

The vintner relies heavily on sales of less-expensive labels in the U.S., the world's biggest wine market. Treasury Wine said Monday it had overestimated U.S. demand in the past year, forcing it to discount or destroy older wines that had passed their drink-by date. The company warned it expects to ship less wine to the U.S. this fiscal year, reducing operating earnings by as much as A$30 million.

Inexpensive, low-alcohol wines such as White Zinfandel, a key Beringer varietal, don't have nearly as long a shelf life as a high-end Chardonnay or many red wines, said Jon Fredrikson, head of Gomberg, Fredrikson & Associates, an industry consultancy in California, noting that many people who used to reach for a white Zin now opt for Moscato, a similarly sweet wine. Even so, he said, it is "very rare'' for large quantities of wine to be destroyed.