Treasury Wine Estates will shrink its California footprint over four years

Treasury Wine Estates, one of the world’s largest wine companies, said it will shrink its California footprint over the next four years, pulling back from vineyards in Napa Valley, Sonoma and the Central Coast while consolidating production for some of its premium brands in Napa.

The Australia-based company told investors this month that it plans to divest vineyard holdings and exit leases in several California regions, sell its wineries in Paso Robles and San Luis Obispo, and reduce operations at its Sonoma Bottling Center. At the same time, production at Frank Family Vineyards in Calistoga and Stags’ Leap Winery in Napa will be moved into the company’s St. Helena Winery, which Treasury said will become its main U.S. luxury wine production hub.

The changes are part of a broader restructuring as the company tries to match supply more closely with weaker demand for wine. Treasury said it is overhauling its California supply chain and rebalancing long-term supply and demand across the business.

“We’re responding proactively and responsibly by aligning our footprint and asset utilization to future demand expectations while continuing to protect the quality, flexibility and reliability our customers expect,” Kerrin Petty, Treasury’s chief supply and sustainability officer, said in a June 3 statement. Petty said the supply-chain changes are meant to support investment in brands and categories where the company sees stronger long-term growth potential while helping maintain a healthier balance between supply and demand in the industry.

The move comes during a difficult period for California wine. Consumption has fallen to historically low levels, putting pressure on growers, wineries and distributors. Across the state, some producers have closed, while others have changed product lines or marketing strategies to respond to shifting consumer tastes.

Treasury framed the California cuts as one piece of a larger global brand overhaul. According to investor materials, the company will focus on three parts of its business: luxury red wines, luxury white wines and what it calls “modern refreshment,” a category it described as lighter, flavor-led wine products.

As part of that strategy, Treasury said it will reduce its portfolio from 76 labels to fewer than 30 over five years. The company did not identify all of the brands it plans to sell or discontinue, but it said it does not plan to divest DAOU in Paso Robles.

That detail matters because DAOU has been one of Treasury’s biggest recent bets in California. The company acquired DAOU Vineyards in 2023 in a deal valued at up to $900 million. It also bought Frank Family Vineyards in 2021 for $315 million. Even as Treasury cuts assets elsewhere, those purchases show it is still concentrating capital around higher-end wines that it believes have better long-term prospects.

Treasury said the restructuring is expected to deliver about $71 million in cost savings over the next three years. It projected fiscal 2026 earnings of $339 million to $346.5 million and said it expects fiscal 2027 earnings to be at least at those levels.

As of Monday afternoon, the company’s market value was about $2.8 billion.

Treasury operates nearly 25,000 acres of vineyards and winemaking facilities worldwide, including more than 6,600 acres in California. Its California vineyard land is concentrated in Napa Valley, Paso Robles, Sonoma County, Lake County and other parts of the Central Coast.

For the beverage sector, Treasury’s decision is another sign that large producers are moving faster to consolidate operations and narrow their brand portfolios as wine demand softens. That could increase pressure on grape prices, contract growing and winery margins in some parts of California, especially where excess capacity remains. At the same time, it suggests major companies still see room for growth at the luxury end of the market even as they retreat from broader production footprints.