http://www.bbc.com/news/business-34524807

Australia’s Treasury Wine Estates, one of the world’s biggest publicly-listed winemakers, has recently announced to purchase the majority of Diageo’s wine business (includes Diageo’s UK based Percy Fox businesses and its US-based Chateau and Estate Wines) for $552.

In August last year, TWE had a difficult period that it had annual loss due to slower sale in China and oversupply in the US. In order to boost the selling of wines in these regions, this year, TWE decides to buy Diageo’s wine businesses. Owning famous brands such as Johnnie Walker, Smirnoff Vodka and Guinness, Diageo can help TWE to transform TWE’s US business into a larger player of scale.

However, from my perspective, the decision that TWE plans to purchase Diageo’s wine business is not proper. First, it is unnecessary for TWE to expand the brands and production line since TWE has more 80 brands and more 11,000 hectares of vineyard. Second, as I mentioned in the second paragraph, TWE oversupplied the US market in the last year, and thus created a big loss. At this point, TWE should focus on increasing sales rather than owning more production lines. Therefore, the purchase of Diageo is unwise.

Image sources:

http://everything-pr.com/treasury-wine-estates-pr/52517/