One of many world’s largest winemakers, Australia’s Treasury Wine Estates (TWE), has acquired a California winery for $1 billion that it hopes to make the linchpin in its efforts to enter the U.S. premium market. 

DAOU Vineyards is owned by two Lebanese-American brothers who began with only a one-acre winery, making wine of their storage. Over time, DAOU grew from a scrappy upstart to what Ben Dollard, president of Treasury Americas, stated would have a “cornerstone function inside our portfolio.”

Over the previous few years TWE has been clear it sees pricier, increased high quality wines as the way forward for its enterprise. 

“TWE’s ambition is evident: to turn out to be the world’s most admired premium wine firm,” the corporate stated in a press launch. 

DAOU was based by Georges and Daniel Daou, who fled Lebanon throughout the county’s civil battle within the Seventies, in keeping with the corporate’s web site. The household relocated to France the place the 2 brothers developed an curiosity in winemaking and ultimately made their method to San Diego. There, the 2 brothers began a community know-how firm, aptly named DAOU Methods, that was acquired by know-how firm Proxicom in 2005 in a deal estimated to be price $22 million. After the sale, Daniel Daou, who had long-been obsessive about wine, purchased a property in Paso Robles, Calif., about three hours south of San Francisco, along with his brother Georges becoming a member of him as a enterprise companion. DAOU now has a roughly 400-acre winery.   

When Dollard met with the Daous he was significantly struck with how nicely they understood their shoppers, he advised Fortune. In the meantime the Daous had been particularly desirous to develop their enterprise past the U.S. “One of many massive alternatives they see for the model is worldwide enlargement and that’s definitely a cloth functionality of us,” Dollard added. 

DAOU, which grows Cabernet Sauvignon, Malbec, and Semillon grapes, has bottles that promote for as excessive as $285 on the favored wine app Vivino. A magnum of DAOU’s 2020 Merlot sells for $590 on the winery’s web site. 

The acquisition consists of $900 million in upfront funds, with one other $100 million if sure efficiency targets are met. 

TWE, which had about $1.6 billion in annual income, has had its sights set on the premium marketplace for a number of years, as American shoppers turn out to be more and more desirous about wine. 

“We’re seeing throughout the wine class, the urge for food and want for shoppers to discover and develop their data and expertise with wine,” Dollard says. “With that comes an urge for food to discover within the luxurious area.” 

In fiscal 2023, 85% of TWE’s gross sales got here from its premium and luxurious manufacturers, a two share level enhance in comparison with the yr earlier than. 

TWE already owns a number of wineries within the U.S. together with Stag’s Leap, Acacia Vineyard, and Beringer Vineyards, the oldest repeatedly working winery within the Napa Valley. Increasing additional into the American market has been a prime precedence for TWE ever since China imposed huge tariffs on Australian wine imports. That tariff got here after Australian Prime Minister Scott Morrison referred to as for an impartial investigation into the origins of COVID-19, a probe that China referred to as “political video games.” In March 2021, Chinese language authorities retaliated by imposing a five-year tariff that went as much as 218% for Australian wines that decimated Australia’s  wine enterprise. Imports to China fell 97% the primary yr. 

“I don’t see why we might look ahead to China,” CEO Tim Ford advised traders earlier this yr. 

Current stories point out the Australian authorities is hopeful Chinese language officers will elevate tariffs on wine imports, which might pave the way in which for TWE to return to the world’s second-largest financial system. “Daou, significantly as a result of we see Chinese language market as a possibility, continues to open doorways for us and and that’s precisely why we get excited,” Dollard says. 

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