Treasury Wine Estates CEO David Dearie was ousted Monday following his decision to destroy about $33 million in unsold wine that was past its prime.
Treasury, which owns several Sonoma County wine brands and vineyards, cited the action as a "key factor" in its decision to dismiss Dearie.
"Over the last two years David has played a critical role in guiding TWE," Treasury Wine Estates chairman Paul Rayner said in a conference call with investors. "He has also successfully built the profile of TWE's iconic wine brands internationally.
"However, following the write-down of excess U.S. inventory ... the board has undertaken a review and concluded that now is the right time to look for a new CEO," Rayner continued. "The recent inventory issue in the USA, including the one-off losses incurred ... significantly dented our overall performance for fiscal 2013 and was a key factor in this decision."
In July, Treasury disclosed plans to dump more than a half-million cases of wine, mostly made in the United States. Dearie said the move would protect the company's reputation by making sure the spoiled wine did not reach consumers.
But when sales failed to reach expectations, the company came under increasing pressure from investors to justify its U.S. operations.
The Australian company reported annual revenues of $1.76 billion in Australian dollars for the year that ended June 30. In Sonoma County, Treasury owns Chateau St. Jean, Cellar No. 8 and Souverain. The company does marketing for Sbragia Family Vineyards. Stags' Leap Winery, Beringer Vineyards and St. Clement are among the company's Napa brands.
"With all the assets they have in California, they're a major player," said Joe Ciatti, principal at Zepponi & Co., a mergers and acquisitions advisory firm in Santa Rosa.
"It's kind of sad. He's a nice guy," Ciatti said about Dearie. "I've always respected him. I think he tried really hard, and I wouldn't think to blame him for this."
Dearie was slated to give the keynote speech at the Wine Industry Financial Symposium in Napa today, but his talk was canceled and other speakers were filling in, said Kathy Archer, president of the group that stages the forum.
"It's the kind of thing that happens in large companies," said Robert Nicholson, principal at International Wine Associates in Healdsburg. "It's always unfortunate. But they've obviously been through some significant issues with inventory."
In the conference call with investors, analysts challenged Rayner and questioned whether it made sense for the company to continue to do business in the United States.
"Do you need the U.S. business?" asked an analyst from Morgan Stanley.
"Yes, the U.S. business is an integral part of our operation," Rayner replied.
Local wine executives declined to say whether they thought Treasury would begin selling off its U.S. assets. If it did, that would make it harder for Treasury to sell its Australian wines in the U.S., Nicholson said.