Ladies and gentlemen, thank you for standing by and welcome to the Treasury Wine Estates FY 2020 annual results briefing. At this time, all participants are in a listen-only mode. Following the presentation, there will be a question-and-answer session today. To ask a question, you'll just need to press star one on your telephone keypad. Just please be advised that today's conference is being recorded. I will now hand the conference over to your first speaker for today, Mr. Tim Ford. Thank you, and please go ahead.
Good morning, everybody, and thank you for joining the Treasury Wine Estates' full-year results briefing. I'm especially pleased today to have joined me on the call some of the members of the leadership team of TWE: Matt Young, our CFO; Tom King from Shanghai, our Managing Director of Asia; Ben Dollard from California, our President of the Americas business; Peter Nilsson, our Managing Director of Australia and New Zealand; and from London late in the night, Michelle Brampton, who's our Managing Director for Europe, Middle East, and Africa. On the 9th of July, we provided the market with a business update which covered our preliminary F20 performance outcomes, along with a progress update on some of the key strategic initiatives.
In today's briefing, we'll provide further detail on both of these, but importantly, I also want to take the opportunity to take time to detail the strategy of Treasury Wine Estates, as well as the strengths and the opportunities of the business, outlining the roadmap that I'm extremely excited to lead. We're a premium brand-focused global leader in wine, with strong positions in our priority markets, supported by a global footprint and business model that is unrivaled by any other player in our industry. Diversification is a feature of our business and at the heart of our strategy. We are diversified across multi-regional sourcing and sales geographies, our iconic and award-winning brand portfolio, the price points in which we play, and the diverse range of consumer experiences that our brands offer day in, day out.
Our premiumization focus continues to gain momentum in F20, with premium wine now representing over 70% of our global revenue, up from around 50% only four years ago. Our talented and dedicated global team is over 3,000 people strong and has worked incredibly hard in recent years to transform this business into what it is today. While we are proud of what we have achieved so far, there is much more for us to do to build on what is already a strong business and to position Treasury Wine Estates for the next phase of its growth journey and the achievement of our ambition, which is to be the world's most admired premium wine company. Supporting this ambition is our long-term investment case, which comprises five key elements at its core.
Starting with the wine category, where global consumption has increased in recent years, most notably in our priority markets. These growth rates have been driven by the consumption occasions that skew more to socializing, celebrating, and sharing, and trends the wine category caters well to. Within wine, consumers have been trading up, and across our regions, we continue to see the premium price points standing out and driving both volume and value growth, ahead of the commercial end of the market, where overall consumption has been declining. The growth of e-commerce and consumers purchasing through multiple different channels has accelerated, definitely, in this pandemic period, and this presents a significant future opportunity for the wine category.
Our global portfolio of well-known and trusted premium wine brands is capitalizing on these attractive category trends, led by our focused brand portfolios, which will continue to drive our momentum and growth in every region. These brands cater to a wide variety of consumers through differentiated varieties, taste profiles, consumption occasions, and price points, and we will prioritize further strengthening this brand portfolio by taking an increasingly consumer-led approach to innovation and brand building to ensure that we have the right brands and propositions in place to capitalize on the key drivers of the category growth. Our competitively advantaged and differentiated route-to-market models provide us with a global distribution platform that is unrivaled in the wine industry, with our overarching goal to be as close as possible to our customers and consumers across each key market.
Efficiency is a key advantage of this model and a driver of value for TWE and its customers, and ultimately the consumer, something that has supported the growth of our portfolios in recent years. This has been most notable in a key growth region like Asia, where we have sustainably grown distribution and availability, as well as depletion rates for our brands over multiple years, through continued and expanded investment to become the number one imported wine company in the region by both value and volume. Our global asset base is a key foundation of the business, with world-class vineyard and production assets in internationally acclaimed winemaking regions such as the Barossa Valley in Australia, Napa Valley in California, the Marlborough region of New Zealand, and the Bordeaux region in France, reflecting a truly global multi-regional model that is unparalleled in the wine industry.
This asset base supports our focus as a growing premium wine company and reflects a multi-regional sourcing model that allows us to mitigate challenging vintage conditions in any one region ahead of our competitors. Complementing this asset base are our winemakers and viticulturalists, who consistently produce wine of exceptional quality, which has seen a number of our brands win significant industry recognition and accolades. The wine industry has traditionally been one that is highly capital-intensive, and in recent years, we've increasingly focused on achieving the right balance between asset ownership and increasing external sourcing models such as grower and bulk wine partner relationships. This approach has contributed to the improved financial returns across our business, as well as the ability to flex and be agile to consumer demand changes.
Finally, our strong, flexible, and efficient capital structure leaves us very well placed to not only navigate the current market challenges but to continue investing in the future growth of our business and support the ongoing delivery of returns for our shareholders. We believe this is a key competitive advantage for Treasury Wine Estates through the cycle. Each of these elements supports our ambition for long-term growth throughout all our regions, with delivery of a group EBITS margin of 25% and higher remaining as our key financial metric target. In Asia, our focus will be on expanding our market leadership by driving distribution depth, breadth, and availability across our premium multi-country of origin portfolio, whilst maintaining strong margins in the high 30% range.
In the Americas and in the U.S. specifically, our priority is to deliver a future-state premium wine business in what is the world's largest wine market and where premiumization trends are particularly attractive. Our focused brand portfolio is performing strongly today and represents the future of our business in this region and market, and one that will drive our progress towards our 25% margin ambition for the region. In ANZ, our priority will be to harness our category leadership to boldly innovate and elevate the category, while driving a channel mix shift to build our market value share ambitions.
And at EMEA, we'll have a dual focus on premiumisation in this region, with continued improvement in our portfolio mix that key sales opportunity, along with increased investment in sourcing luxury wine from the region, particularly in France, where we completed our first investments in vineyard and production assets in fiscal 2020. Later in the briefing, I'll provide more details around our TWE 2025 strategic framework, our Game Plan, and within that, our key priorities for fiscal 2021. Like many other industries and businesses, the COVID-19 pandemic has had a significant impact on Treasury Wine Estates in the recent months. During this period, in-home consumption of wine has increased significantly across many markets, driving high levels of activity through the bricks-and-mortar retail channels, and as I mentioned earlier, accelerating activity through e-commerce sales channels.
Shoppers have been prioritizing speed and convenience of purchase, and well-known and trusted brands are performing particularly strongly, which has resulted in our key focused brands continuing to perform well across these channels. Away from retail and e-commerce, however, key sales channels for higher-margin luxury wine, which include on-premise, our cellar doors, and our global travel retail business, have all been closed or significantly impacted during the period. Through the second half of fiscal 2020, this has had a substantial negative impact on our overall portfolio sales volume mix and EBITS, particularly in Australia and the U.S. Reduction in gatherings, social occasions, and events have also impacted consumption in key markets like Asia. In recent months, however, we have seen gradual improvement in performance across some of our key markets, as some of the most impacted channels do reopen and consumers adapt to what is a new normal.
But we remain cautious on the near-term outlook, given considerable uncertainty remains around the timing and pace of recovery, including the continued closure of some channels in the markets. Across other key parts of our business, I'm very pleased to say that we've successfully managed through the impacts of COVID-19 with minimal disruptions. There's been no material interruption to our global supply operations, and the 2020 Australian vintage was successfully completed with key health and safety restrictions and protocols in place. We currently do not expect any interruption to our upcoming vintage in California. Further, our capital structure, liquidity, and very strong operating cash flow and cash conversion remain key strengths that will allow us to navigate through the pandemic while we keep investing in our brands and the asset base as appropriate to support our future growth ambitions.
Finally, our global workforce has transitioned smoothly to flexible and remote working arrangements, and we have prioritized the redeployment of our resources and our team members from the impacted parts of our business to support other markets and channels where activity has increased. Our resilience through this period underlines the fundamental strength of our diversified global business, our brand portfolios, and our organizational capability, which gives us optimism around our future return to both margin and profit growth. However, there are a number of recent trends from the pandemic which we also think will become permanent changes in behavior and absolutely represent opportunities for us to harness in both the short and the long term. Our COVID-19 Plan Ahead agenda is focused on ensuring that Treasury Wine Estates emerges through this pandemic a fitter and stronger global business.
Our first area of focus is around people trends, where changes to work and lifestyle arrangements will require us to think innovatively around our return to work and workplace models, with progressing the efficiency of remote working a near-term priority and one we're already doing a lot of work on. Supporting our global workforce during this period has also been of critical importance to our leadership team, and we will continue to prioritize the rollout of employee support programs, which are focused on both physical and mental health and well-being. Linked to this, personal health has also become an increasing imperative for many of our consumers, and we will accelerate our programs to enhance our portfolio presence around the "Better for You" category trend.
Broader consumption trends we are seeing at home, food-led wine consumption growing, and as I mentioned earlier, the demand for well-known and trusted brands has stood out during this period. In response, we will increase our investment in our focused brand portfolio, and we will take a consumer and experience-led approach to brand building to implement interactive models that enhance engagement with the consumer whilst at home using technology more so than traditional formats. We are rethinking the way in which we engage with our luxury wine consumers, and we have commenced a significant and detailed global research study which we will use to refine our route-to-market portfolio and innovation strategies for our luxury brands. We also expect hygiene and sustainability trends to remain a high priority for consumers. Therefore, the innovation of our pack formats is also going to be a key area of focus for us.
Purchasing trends have also changed significantly in recent months and in many respects reflect years of evolution in just a very short space of time. We believe these changing trends will have a permanent impact on our channel mix long term, and they present us with a unique and exciting opportunity. Among the key initiatives we will pursue are the increased use of customer data and insights to drive engagement and transactions, and we will increase our investment behind both existing and new e-commerce platforms, which are well positioned to meet the increased consumer need for convenience of purchase going forward. We will also partner with our customers in this space to help drive this opportunity for their own existing platforms. We'll have more to say around the progress and evolution of our Plan Ahead agenda over coming months.
Turning now to our fiscal 2020 financial performance, which I believe reflects a resilient performance through extremely challenging trading conditions. Net sales revenue declined 6% in fiscal 2020, with the strong performance in the first half offset in the second half, where our portfolio mix was significantly impacted by the COVID-19 impacts I've described earlier. In the US, challenging market conditions resulted in revenue decline also across the year. EBITS declined 22% to AUD 533.5 million. Our EBITS margin declined 4 percentage points to 20.1%, and earnings per share declined 26% to AUD 0.439 per share, reflecting not only the decline in our top-line performance but also the impacts of high cost of goods sold per case through fiscal 2020, particularly across our Australian-sourced commercial and masstige portfolios and driven also by lower volume.
Pleasingly, our cash flow performance was strong, with a 95% cash conversion outcome up 16 percentage points on the prior year, supporting the maintenance of our strong balance sheet. And as a result, we have declared a final dividend of AUD 0.08 per share, representing a AUD 0.28 per share payment for the full year and a payout ratio of 64%, which is in line with our long-term dividend policy. So with that introduction, I'll now hand over to Matt, who will provide more detail on the financial results.
Thanks, Tim. Good morning, everyone. The diversity of our business across global markets, channels, sourcing regions, brands, and price points has been a deliberate strategy and a source of pride for TWE for many years, but its importance to ensuring the ongoing strength of our business has only been highlighted in the current environment. Our global model has ensured that despite challenges, we have remained profitable, capitalized on areas of opportunity, delivered strong cash flow, and maintained our healthy balance sheet. We're especially proud of our strong financial position that has allowed us to continue to invest behind brands, continue to invest behind our premiumization strategy while still providing returns to shareholders, and we are confident that as trading conditions improve in our key markets and as we implement the key elements of our strategic agenda, we will be well positioned to become an even stronger business in the future.
Looking to our key measures of performance in F20, group net sales revenue declined 6% on a reported currency basis or 9% at constant currency, driven by a 9% decline in volume. NSR per case increased, driven by the continued portfolio premiumization, particularly in the first half, but offset by disruptions to key channels for higher-margin luxury wine through the second half. Despite this, the luxury and masstige portfolios now contribute 71% of global NSR in F20, up from 69% in the prior year. COGS per case increased 6% or 3% on a constant currency basis, reflecting higher COGS on Australian-sourced commercial and masstige wine and US-sourced luxury wine. Cost of doing business margin increased slightly to 21%, driven primarily by the reduction in net sales revenue.
Total cost of doing business improved in F20, largely driven by key organizational changes that were implemented in F19 and proactive cost management of discretionary expenditure through the second half, which did include the non-payment of all discretionary incentives in respect of F20 performance. EBITS decreased 22% to AUD 533.5 million, and EBITS margin decreased to 20.1%. Finally, ROCE declined 3.3 percentage points to 10.6%, reflecting the decline in EBITS and a relatively stable capital base. Before moving to the balance sheet, I wanted to highlight some important aspects to help everyone navigate our F20 results, recognizing that this is clearly an unusual year. Firstly, as for many companies, to understand our performance in F20, it's important to think of the business in two halves. You will hear reference to this a little bit from the team today as they speak about their regions.
To make it easier, we've broken down our first half and second half performance in the appendices to our profit report. Tim's already given you a good insight in terms of how COVID-19 impacted us in the second half. Secondly, and on this slide, in respect of material items which relate to long-term structural changes and in other years major acquisitions, disposals, and write-downs and are excluded from EBITS, we incurred costs of AUD 37 million or AUD 26 million after tax in F20. These related firstly to our investment in luxury winemaking capacity in South Australia, which will deliver a one-third capacity increase in luxury winemaking. In addition, we've incurred approximately AUD 11 million of restructuring costs in the US associated with our strategic agenda program.
In both cases, we expect further costs to be incurred over the course of both projects, which we've highlighted on the slide, but we'll also deliver long-term improvements, which we've also highlighted, and Tim will discuss these a little later. And the final point relates to a number of items which were recognized in F20 within EBITS, as they usually are. These relate to asset sales, write-downs, and incremental provisions. They're primarily related to our Americas region, given ongoing programs of work in that region over the course of several years, and the F20 market conditions which we've explained previously. And further details are set out on this slide. In the case of incremental inventory and trade receivables provisions, these relate to the increased uncertainty we face in the current environment, both as a result of COVID-19 trading conditions and the ongoing U.S. bulk wine market.
We've taken a prudent approach to maintain a high level of provisioning in F20. We wanted to set these out on a single page to give investors insights to the underlying trade impacts. As well as providing that transparency, I hope this slide will show that the quality of earnings both at a group level and a regional level is clear. Moving now to the balance sheet, which continues to remain strong, flexible, and efficient. Net assets were broadly in line with the prior year, driven by higher net debt and lower working capital and tax balances. We'll cover the elements of inventory, CapEx, and debt on the following slides, but let me quickly touch on receivables. Trade receivables have declined as a result of the lower second half sales, which we've outlined earlier.
Investors will note in our financial statements a modest increase in our receivables aging in F20, but I'd like to reassure investors that this does not give us cause for concern. We have continued to support and in turn have been well supported by our customers as we manage through this uncertain trading environment. Where we have needed to be patient and more supportive in a small number of circumstances, we have been. I know that these trading relationships are strong and will remain strong into F21. While not wanting to labor the point, we do not have any customers in financial distress, and no bad debts were written off in F20 in any of our key markets. Turning to inventory in more detail, which has increased by AUD 29 million to AUD 2.1 billion, valued at cost at the end of June 2020.
Overall inventory volumes declined 9% on the prior comparable period, offset by a more premium mix in inventory held, as well as higher vintage costs for inventory on hand. The primary driver of the volume trends was both the impact of the lower yielding and higher cost 2020 Australian vintage, as well as the carryover of luxury inventories from the second half of fiscal 2020. Luxury inventory increased 8% overall, primarily as a result of the higher cost recent Australian and Californian vintages. In volume terms, total luxury inventories declined 5%, which reflects the combination of a smaller 2020 Australian vintage, which was down 45% at a luxury level, partly offset by the carryover of unsold wine which had previously been allocated to the second half of fiscal 2020.
As we've stated previously, our luxury allocation model is a key strength of our business, and it provides us with the flexibility to manage through changes in short-term demand or single vintage variation, as we've seen in fiscal 2020, and still deliver long-term growth. It's also important to note we remain very comfortable with our luxury and masstige inventory position as a source of future earnings growth. While short-term consumption has been impacted due to disruptions in some of our key channels for luxury wine, consumer demand for luxury wine in all our key markets remains a long-term dynamic and we have confidence in and has shown resilience over previous long-term economic cycles. Turning now to cash flow and net debt. As you can imagine, we've been very focused on cash flow management over this period, and our balance sheet and strong liquidity position reflect that.
Operating cash flow before interest, tax, and material items was AUD 661 million in line with the prior year. While we've been prudent in managing our cash flow expenditure, we have continued to invest in the business and behind our brands where it makes sense to do so. In some cases, brand investment was shifted to support growing sales channels such as e-commerce. Cash conversion at a reported level was 94.7%, an improvement of 16.3 percentage points versus the prior year. It's driven by lower sales in Q4 and the smaller Australian vintage, offset by the higher levels of luxury wine inventory that was carried forward from the second half of fiscal 2020. We have chosen to update our long-term target guidance approach for cash conversion.
Rather than an overall reported 80% target cash conversion, we will more directly target cash conversion of 90% or higher, excluding the annual change in luxury, masstige, non-current inventory. You've heard me talk repeatedly about this metric previously, and feedback from investors tells us this is a better formal target, and we hope it gives greater clarity around our cash flow, particularly as we remain focused on continuing to invest in luxury inventory to support future growth ambitions. And as shown on the page, we have consistently delivered 90% cash conversion, excluding that investment in non-current inventory. Moving to CapEx, we also took a prudent approach to CapEx in the second half as we prioritized managing liquidity in conjunction with continuing to invest for future growth.
Total CapEx for the year was AUD 189 million, of which growth CapEx was AUD 106 million, including the investment in luxury wine-making infrastructure in South Australia and the acquisition of vineyard and production assets in Bordeaux. The investment in luxury wine-making infrastructure in South Australia is progressing well, and we accelerated some elements of the project during the year. However, we have experienced delays in sourcing some equipment from overseas due to the COVID-19 supply chain impacts, and as a result, the new infrastructure is now expected to be operational in time for the 2022 vintage, one year later than initially planned, but please note this delay will not have any impact on our production capacity for the 2021 vintage. We expect fiscal 2021 CapEx to be up to AUD 200 million, including maintenance and replacement expenditure in line with the prior year guidance and continued investment to support future growth.
Finally, turning to capital management, where our capital structure continues to reflect an investment-grade credit profile. Leverage increased to 2.2 times in the year, reflecting the decline in earnings. However, we remain confident of maintaining our target of less than two times through the cycle. Our liquidity position remains strong with cash of AUD 449 million and undrawn committed debt facilities of AUD 920 million across a well-diversified maturity profile at the end of June, providing total liquidity of just under AUD 1.4 billion. This strong liquidity position supports the maintenance of our long-term dividend policy and is reflected in the strong, confident, but prudent decision to declare today a final dividend of AUD 0.08 per share, fully franked, delivering a full-year payout of AUD 0.28 or 64%. Thank you.
I now have the genuine pleasure of handing over to Tom King in Shanghai to talk to you about the Asia region.
Thanks, Matt. Good morning, everyone. Despite the challenges in the second half of F20, we've continued to see strong and growing support for our brand portfolio throughout Asia, and the strength of our business model is becoming even more evident. For the Asia region, net sales revenue declined 14.7%, driven by second half volume declines in all key regions, with the majority of sales channels being shut down during February and March. NSR per case grew 12% on the prior year as we continue to grow our luxury and masstige portfolios. EBITS declined 14% to AUD 244 million, resulting in an EBITS margin of 39.5%.
In China, the market is showing signs of recovery as consumption occasions resume, with improving weekly trends across all channels from April onwards and channel operation now largely back to normal. Consumption trends are recovering quickly as more on-premise outlets reopen and traffic increases. Our depletions in the second half reflect broader market trends, with sharp declines in Q3 followed by depletions growth in Q4, driven by the lifting of government restrictions and also continued investment behind our brands. June depletions were up approximately 40% on the prior year. E-commerce sales, already on a strong growth trajectory pre-COVID, accelerated further, and TWE was the clear market leader across total wine, achieving 84% value growth in F20 compared to 28% for the total category. For TWE, sales in this channel also reflected continued premiumization despite the broader market shift online towards lower value wines.
We continue to work closely with our partners to ensure alignment between shipments and depletion rates, and we are comfortable with our current inventory levels in the market. In the first half, we called out an inventory reset of competitive brands by distributors and wholesalers. Declining trends in import data across all countries of origin suggest that this reset is continuing and, in fact, accelerated due to COVID-19 and its impact on working capital. While we closely monitor the geopolitical environment, our focus will remain on building brands, investing in the market, engaging with our partners, and ensuring our own compliance. To this point, we've not seen any evidence of any issues that have impacted ours or our customers' businesses.
Turning to performance across other Asian markets, where, similar to China, after strong momentum in the first half, we saw volume declines across key markets in Q3 ahead of signs of recovery in Q4. Markets and channels exposed to tourism remain subdued, however. On a full-year basis, Southeast Asia EBITS grew 8%, driven by very strong first half performance, and we remain optimistic about the opportunities for long-term growth in these markets. In terms of highlights for F20, our strategic focus on driving distribution and availability has continued to result in substantial gains for our portfolio, and our depletions are a testament to this. Key priority brands, including Penfolds, Wolf Blass, Maison de Grand Esprit, and Rawson's Retreat, delivered full-year depletion growth and significant market share gains. Our business model centered on self-distribution and our investment in marketing and pull-through programs is continuing to drive growth in this market.
You will also note that we have lifted our EBITS margin guidance for the Asia region from 35% plus previously, now to be in the high 30% range, which is in line with what we've been delivering in recent years, and we expect to maintain moving forward. Turning to brand highlights, the Rawson's Retreat Your Ideal Wine Moment was a successful digital campaign aimed at expanding our consumer base. The campaign generated increased brand awareness with 190 million online impressions, 5% depletion growth, and took the leadership on e-commerce in the commercial wine segment. For Penfolds, we launched the 60th anniversary year of the Grange Vintage Red Wine Magnum, which was supported by powerful in-store activations featuring unique number animations. And in Southeast Asia, Wolf Blass partnered with the Michelin Guide to showcase wine pairing with Southeast Asian flavors through iconic recipes created by Michelin-starred chefs.
The campaign reached over 20 million consumers, keeping the momentum despite government restrictions. The program expanded to include virtual and home dining experiences for consumers, highlighting wine pairings with elevated local dishes. Clearly, our brand investment remained strong and focused in F20 and delivered lots of positive momentum, and we look forward to building on this in F21. I'll now hand over to Ben Dollard to discuss performance in the Americas region.
Great. Thank you, Tom, and good afternoon, everyone from Napa Valley, California. As an Australian who was born and raised in Adelaide, just around the corner from Penfolds Magill Estate Winery, I'm delighted to be speaking to you today as a member of the Treasury Wine Estates Leadership Team and President of our Americas region.
I've spent the last 25 years working in the US market in the alcohol beverage industry, including the majority of that time in the wine industry. I'm looking forward to leading Treasury Wine Estates on what is going to be an exciting period ahead for us in this region. In F20, net sales revenue declined 12% and EBITS declined 44%, with our performance reflecting the persistence of challenging US wine market conditions through the second half, including the effects of COVID-19 and the continued acceleration in the growth of private label, which had two direct impacts on us. First, there were significant disruptions to the on-premise and cellar door traffic. The other key channels outside retail and e-commerce, which are weighted to higher margin luxury wine, and as a result, our overall portfolio mix was adversely impacted.
Second, in response to these disruptions, there was industry-wide destocking from distributors to reduce inventory holdings, which in turn led to our shipments being below depletions by 7% in F20. While retail channels continue to perform strongly and we have seen positive momentum through our direct-to-consumer and e-commerce platforms, the pace of stabilization in these other channels has been gradual, and as such, we remain optimistic but cautious on the short-term outlook. In recent months, we have fundamentally evaluated the strategic direction of our business and reimagining it with a view to assessing how we best realize our opportunity in the US market long-term. Later in this briefing, Tim will update on the significant structural changes that we are implementing. But ahead of that, I want to touch on some of the key elements that I firmly believe put Treasury Wine Estates in a strong position to succeed moving forward.
The U.S. is the world's largest premium wine market, and it continues a multi-year trend of premiumization led by strong growth in premium price points. This trend has not been impacted by either COVID-19 or recent market oversupply dynamic. In the 12 months to June 2020, the $8 and $20 and above $20 price points grew in U.S. retail by 10% and 19% respectively. Driving this growth has been the evolution of the U.S. wine consumer, which includes the next generation of wine drinkers who are entering the category and have been trading up to higher price points. These favorable premiumization dynamics set a very positive backdrop for our focused brand portfolio, which are a diverse portfolio of luxury and premium offerings that fit the profile of where the consumer is going, include brands like Beringer, BV, Stags' Leap, Penfolds, 19 Crimes, Beringer Brothers, Matua, and St. Huberts The Stag.
This portfolio very much represents the future of our business and has been in strong growth throughout F20, with that growth having accelerated in the past six months to be up over 27% in retail versus prior year. Nielsen and IRI retail channels, while large and critical to the wine category, capture a portion of the market. We expect that other key channels, such as independent on-premise and off-premise, direct-to-consumer, and e-commerce, will also be fast-growing channels in the Americas for our focused brands going forward. We are actively investing in these channels and engaging with both our consumers and retail partners in this space. Supporting execution across existing core and growth channels will be our redesigned sales and operating models, which we have recently implemented.
These models will focus on a number of key areas, including a dedicated luxury sales team that will bring our brands to life across on-premise, independent, and retail chain accounts. In addition, we are improving our approach and harnessing our brand-building skills and working more closely with our distributors to drive the strategic direction of our business together. Highlights across our focused brand portfolio include the recent successful launch of 19 Crimes Cali Red, a multi-year partnership with entertainment icon Snoop Dogg, which sees our first California wines from the 19 Crimes label. We've had tremendous success with the #StayHomeWithStagsLeap promotion, which ran during the recent lockdown period, accompanied by targeted digital advertising and driving over 500% growth in e-commerce for the brand. And finally, our Matua brand continues to go from strength to strength, driving significant distribution gains in cold box across the market. Thank you.
I'll now hand over to Peter Nilsson in Melbourne.
Thank you, Ben, and good morning. The ANZ business navigated a difficult second half relatively well, with strong retail channel performance partly offsetting the impact of the closure of other key sales channels. As we have called out previously, retail channel performance was, however, weighted to the masstige portfolio, with lower sales of high-margin luxury wines impacting financial performance. For the ANZ region, NSR declined 1.7% with NSR per case broadly in line with the prior year, despite declining in the second half due to a mixed shift away from TWE's upper-end luxury portfolio. COGS per case increased 4.3% due to higher cost of goods on Australian-sourced commercial and masstige wine from the 2019 vintage. This led to regional EBITS of AUD 133 million and a margin of 22.5%.
The current retail market is still seeing elevated sales volumes, with growth driven by the above $10 price points. TWE is growing ahead of the market in the $10-$20 price segment led by focused brands including Squealing Pig, 19 Crimes, and The Stag. We have also seen strong Wolf Blass, Lindeman's, and Pepperjack depletions as consumers increasingly seek well-known and trusted brands in the current environment. Pleasingly, in F20, we have continued to premiumize our portfolio and deliver a mixed shift towards premium volumes as we target specific opportunities for growth across different price points, varietals, and occasions. Consumer behaviour has evolved even more rapidly in the COVID environment, and we will continue to review our business models and offerings to connect with consumers in more convenient and impactful ways.
Finally, I would highlight the performance of our viticulture, winemaking, and production teams who did an amazing job through clearly trying environments to not only maintain production levels but also successfully deliver the 2020 Australian vintage despite the logistical challenges in doing so. In terms of brand highlights for F20, 19 Crimes continues to go from strength to strength and was the leading brand in the wine category in terms of value growth in F20. In March, we delivered the most successful through-the-line campaign to date for the brand, with 630 disruptive prison ship displays as part of the Find the 19th Cork promotion. 19 Crimes was also ranked number four in the world's most admired wine brand by Drinks International, an incredible result, particularly having not previously ranked in 2019. Another highlight was celebrations for Penfolds' 175th anniversary.
A gala event was held at Penfolds Magill Estate with more than 100 guests from around the globe dining in the transformed Drives. As part of the celebrations, Penfolds unveiled a new rare wine, Special Bin 111A, a Clare Valley Barossa Valley Shiraz from the 2016 vintage. It has been almost a decade since Penfolds last released a special bin wine, a testament to the quality, criterion, and craftsmanship required to create a wine of this stature. We continued to invest in strategic partnerships to support the growth of our core brands. Seppelt once again partnered with the Victoria Racing Club during the Melbourne Cup Carnival, which includes naming rights of the Seppelt Wines Stakes Day. TWE returned as the official wine supplier for the Australian Open 2020, following a successful partnership in 2019.
We returned to Melbourne Park for the Grand Slam event, serving up a stellar selection of wines from across our Australian portfolio. Wolf Blass also continued its association with the AFL, having been the official wine partner of the AFL since 2016. With a long tradition of involvement with Australian football, the brand has a strong connection to sport, specifically pursuing triumph in sport. That's just a snapshot of some of the many activities we have underway, supporting focused investment behind our core brands. In summary, I'm very pleased with the ongoing performance of the ANZ business. I see the changes in buying patterns for luxury wine as temporary and still see opportunity to accelerate premiumization in this market. I'll now hand over to Michelle Brampton to discuss performance in Europe, Middle East, and Africa.
Thanks, Peter. And good morning, everyone from London.
While we have seen retail sales upside from lockdown channel changes, notably in the UK and Nordics, F20 results were impacted by declines in the second half outside of those two markets and non-retail channels. For the region, volume and NSR declined by 4% and 3.7% respectively, with second half declines in Continental Europe, the Middle East, and Africa, and GTR due to channel closures, partly offset by strong masstige portfolio performance through retail in the UK. COGS per case increased by 7%, reflecting an improved mix shift and higher COGS on Australian and US-sourced commercial wine. Favorable cost of doing business reflects our continued disciplined approach to brand-building investments and overhead management through F20. Regional EBITS declined by 25%, led by lower top-line performance in Continental Europe, Middle East, and Africa, and GTR through the second half.
The wine category is now in strong growth across most European retail markets, driven by the globally consistent trend of switching from on-trade to off-trade. Positively, there is strong momentum for higher-priced wines and branded wines, particularly masstige wines, and TWE brands offer that premium choice. In the UK, TWE's second half performance is being driven by accelerated demand for Blossom Hill, Lindeman's, and the continued strong growth of 19 Crimes. Like other regions, we've seen a strong acceleration in e-commerce sales across key markets, with consumers increasingly shifting to this channel for convenience and personal safety. The majority of sales in the EMEA region come from our five core brands: Lindeman's, Blossom Hill, 19 Crimes, Wolf Blass, and Penfolds. And investment behind these core brands continued in F20. Some of the highlights included the very successful launch of Blossom Hill Gin Fizz.
Gin Fizz is the brand's latest NPD offering. It increased volume sales by 195% during F20, capitalizing on the trend that blurs the lines between drink categories. The launch was supported through Blossom Hill's summer sampling campaign in Q1 of F20 and featured in the online campaign Friendship Fridays in June 2020. Recently, TWE launched a premium D2C platform, the Winery Collection, to connect with consumers and give them direct access to our multi-country of origin luxury portfolio and respond to the online trend. We also entered into a partnership with Wolf Blass and Deliveroo, where 20,000 samples of Wolf Blass were delivered with Deliveroo orders aimed at building the quality credentials of the Wolf Blass brand. Despite recent challenges, we are focused on supporting our customers and planning for recovery.
Our regional strategy, which is to create sustainable growth and premiumization, ensuring our brands are relevant to consumers while continuing to drive a mid-teens EBITS margin, remains firmly in place. I'll now hand back to Tim.
Thanks, Michelle. I'm now very pleased to present externally what we've spent the last month presenting internally, which is what we've called TWE 2025, which sets out our blueprint for the next five-year plan at Treasury Wine Estates. It replaces the Strategy House that many of you will know well and is an evolution, not a revolution, of our strategy, but setting out how we're going to achieve our ambition to be the world's most admired premium wine company. To deliver on this ambition, we will be bold in our decision-making and the way in which we innovate to drive change in the world of wine.
And this will be the TWE way to boldly lead change in the world of wine. Supporting this, importantly, will be our DNA, the cultural code with which we will act and will form the experience that everyone who touches TWE has. It reflects the next phase of the cultural journey of our organization. And our Game Plan describes how we will operate and grow our business and what success looks like for each part of our company across our brands, sales models, sourcing platforms, partnerships, and our talent. While there's a lot that we're doing that is working well, we will pursue change and transformation in a number of key areas, acknowledging that we need to do things differently to deliver the next chapter of our growth story. And there are five pillars to this Game Plan.
Firstly, across our portfolio of brands, our focus will be firmly on the consumer and the personalized experiences we want them to have with our brands every time. Over time, we've done a good job of orienting our business with a changing mindset from being agricultural-led to brand-led, and the next critical stage of our brand-building journey will be to hold the consumer even more so at the heart of everything we do and in every decision we make. Our diverse multi-regional and multi-channel sales model are a key strength, and we will drive even more balance in our sales mix through a specific focus on growing our premium brands through D2C and retailer e-commerce in all of our markets and regions where they are a priority.
While doing this, we will continue to build on what we have strong relationships with our key distributor and retailer partners today and take those to another level. Having access to premium sourcing through our sustainable multi-regional sourcing and winemaking models in some of the world's most iconic winemaking regions is a significant competitive advantage for our business. We plan to build on this in a way that is truly innovative, consumer-driven, and sustainable. We will make the wines our consumers demand at the very best cost and will become an industry champion and leader in sustainability throughout our supply chain while continuing to operate with the utmost efficiency. Building on this, we are going to drive a step change in the way we approach partnerships.
While we have always talked about the importance of partnerships and have cultivated many enduring relationships and networks across our business, we must do more for the next phase. This evolution of mutually beneficial partnerships across a wide range, such as customers, growers, suppliers, government, industry bodies, and the communities in which we operate, will be an absolute priority for us. And finally, to our most important pillar of the Game Plan, our people, who are without doubt our most important asset and the key to our future success. Under my leadership, we are going to drive increased engagement across our global team with an elevated focus on how we recognise and reward more broadly and how we better support and connect with one another and how we continue to evolve to becoming the fun, bold, and highly motivating culture we aspire to achieve in this business.
While components of the Game Plan and initiatives within it will naturally evolve over time, you can expect the key elements that underpin TWE 2025 to remain consistent as a very clear path to the next phase of our long-term growth journey. Across our business, there will be five priority focus areas in F21 which will see us bring this Game Plan to life. Managing performance, number one, particularly through the COVID-19 impacted trading environment, is our top priority. We will stay the course in the areas where we are winning, led by our focus brand portfolio, which continues to perform well across our markets, while continuing to work closely with our customers and suppliers together to manage through the recovery, and we will focus on harnessing those opportunities we've talked about that have been created by changes in consumer and shopper behavior.
Accelerating our shift to a consumer and experience-led marketing model, brand-building model will also be a key priority. We will do this by prioritizing insight and data-led decision-making, technology development, and investing behind fewer but bigger, more disruptive campaigns and innovation priorities. Supply chain optimization is the next priority for us in F21. Many of you will recall the successful supply chain optimization program we implemented some five years ago, which not only significantly reduced costs and improved the efficiency of our global supply network, but importantly, set us up through increased wine availability to support the premiumization strategy that has delivered strong growth over multiple years.
The time is right now to undertake this expansive program-driven approach again in F21 to ensure we maximize our asset utilization and drive the additional focus on sustainability, where, as I said earlier, we intend to become an industry leader in what is a very, very important space. We expect annualized cost savings from these initiatives to be at least AUD 50 million by F23, based on the timing of release. Turning now to the Americas and our plan to deliver the future state premium wine business in the US, where, as Ben said earlier, we've reimagined our business to determine how best to realize what we believe is a significant opportunity for TWE long term.
This future state business will be one with broadly half the volume of today, but heavily concentrated to premium price points, differentiated brands, resulting in a similar level of earnings, but with significant progress towards our 25% regional EBITS margin ambition and a growth portfolio. This brand portfolio, which has been in strong growth and is outperforming the category in the U.S. retail trade, represents the future of our business in this market and gives us confidence around achieving our ambitions over time. We'll continue to progress the previously announced restructuring initiatives through to the end of calendar year 2021, noting that the organizational restructure, which has been significant and recently completed, with AUD 35 million of annualized cost benefit to commence in F21. And finally, to our plans to accelerate the separate focus across our portfolio.
As I stated in last month's update, we believe there is long-term value that will be created from a separate focus for Penfolds and our other premium brands. And our priority in this fiscal year will be to determine what the best operating model to deliver that growth and value creation is, which may include the potential demerger or internal divisionalization model as another alternative. As you can see on the slide, the characteristics of the separate portfolios are differentiated across key items such as your brand hierarchy, the price point center of gravity, strategic priorities, as well as the future respective drivers of growth, underlining, hopefully, the rationale and the benefits that a separate focus will bring to both portfolios. And we'll provide further update on this initiatives by our first half of our F21 results.
So in closing, F20 was a unique year for Treasury Wine Estates, our industry and the markets in which we operate. Our results reflect a resilient performance despite two significant market factors: COVID-19, which adversely impacted overall demand and mix, and the U.S. market oversupply dynamics. Notwithstanding these challenges, consumers continue to engage with our brands at premium price points. Our operating performance remains strong, supported by strong cash conversion and a healthy balance sheet. Whilst there's positive signs of recovery which have emerged in some of our key markets, we remain cautious on the near-term outlook given the uncertainty that remains around the pace of that recovery. But we are well placed, we believe, to return to sustainable growth in the future once our markets stabilise.
Supporting this confidence is the strength of our global business, including the attractive category fundamentals across our key markets where we have a strong market position, the best global portfolio of premium wine brands, a global distribution footprint which is unrivalled in the world of wine, our world-class asset base supported by a strong and flexible capital structure. And all this gets brought together by our world-class talent, our team. So our refreshed strategic blueprint TWE 2025 lays out for all to see our ambition, our DNA, and our Game Plan and sets the basis for our clearly defined F21 priorities, which are focused on a balanced agenda that addresses the near-term challenges we face while laying the foundations for the next phase of our sustainable long-term growth journey.
Or as I like to call it, the two-speed operating model with the cash cow, we take care of business today while planning for tomorrow. So thank you for joining us today. Our presentation has gone a little longer than what we would normally do, but I think it was important that everyone and our investors in particular heard from a number of people from our leadership team. So I trust you've appreciated and enjoyed that as well. So before we go to Q&A, I'll just apologize for the July 9th upfront where we received some feedback that we did cut short the Q&A a little too early. So apologies for that.
We'll ensure that as we go through the questions today, and I would ask you to leave it to one question per person if you can, that we give everyone the time to ask what you want to know. So with that, Operator, I'll open up for Q&A.
Certainly. Thank you, ladies and gentlemen. We will now begin that Q&A session. So once again, if you did wish to ask a question, you can just please press star one on your telephone keypad and then just wait for your name to be announced. And if at any time you do need to cancel your request, it's just by pressing the pound or the hash key. So we've got our first question from Craig Woolford from Citi. Please ask your question, Craig.
Good morning, Tim and Team. I'll give everybody one question.
I might focus. Oh, geez, I've got more than one. I'll focus on the Americas. That's the more fundamental issue. I am interested in China, but I'm sure someone will ask about that. So with the outlook for that Americas business, looking at one of the pie charts that's in the deck, it looks like there could be upwards of a five million case reduction in volumes for that business. Is that something you're committed to irrespective of whether you're able to sell that? In other words, you would exit without necessarily selling it at a meaningful price. And related to that, does it impact your ability to do direct distribution in the U.S. and in those key states where you've shifted to that model? And I know it's a last question. I'm surprised why you're so focused on reducing commercial in the Americas.
Why is that not a global focus for the business?
Thanks, Craig. And morning to you. I think I'll take the majority of the question, but I'll also ask Ben Dollard to comment on the distribution model also when I've finished answering my components. I think the first, certainly the ambition around the volume where we believe the business and the ambition we want to achieve is broadly half the size of the business today. And that links to playing to our strengths is the way I call it. And that's the idea behind the strategy and really driving the strategy we're working towards in the United States.
So where we have premium price points, premium differentiated brands that deliver us the margin uplifts and are growing, and we have the consumer base that is believing and purchasing those brands, that is the priority portfolio that Ben touched on, the core nine brands in that market. With the commercial portfolio, we have a number of different alternatives we're exploring in terms of, yes, divestment's one of those, but there's also the potential that based on our planning and inventory over time that we actually just reduce those naturally in a quicker manner than what we've done over the last five years. That's another alternative. And there's different models we're actually looking at. So that answers the question on the, I guess, the shape of the U.S. business from a volume point of view.
From a global perspective, I think the commercial focus across our business, and I think as you've seen with the numbers we've presented today, we continue to increase the percentage of our total NSR from a premium brand, luxury masstige combined, above 70% now. We'll continue to drive that. We'll continue to focus on that as a key metric for our business. However, differentiated commercial brands are not bad for our business. 19 Crimes, you could argue, is a commercial wine that has a strong differentiation point with our consumer base. Where you have brands that are strong and aren't necessarily subject to the marketplace volatility, so again, a strength for us, we believe that those brands will continue to be important to our business going forward. So Ben Dollard, I might hand over to you to comment on the distribution arrangements in the U.S. Sure.
Thanks, Tim. I think at the cornerstone of our strategy, and certainly our strategy moving forward, is the focus on our core nine brands. And that strategy is certainly paying dividends relative to the market performance. To that end and to the question, Craig, we don't see anything changing relative to the markets where we operate directly, relative to the relationship we have with our retailers and how we interact with our retailers. And again, it's going to largely hinge on our focus on our core nine brands and driving and investing by them. So I think for us, it's very much a focus effort and working very closely with our retailers and our distributors in those direct markets.
And the last comment I'll make, Craig, is that there's a view that scale is crucial when it comes to total volume.
I'd argue that scale of growing brands and brands that deliver margin to ourselves, our retailers, and our distributor partners are the brands that will get the focus of not only their sales teams but also their promotional activity, etc., as well. So when we talk scale and when I talk scale, I want scale as a large percentage of our business of brands that are growing and delivering margin to all of our partners in the value chain. So maybe reorienting the scale discussion a little bit there as well. Thanks, Craig.
Thanks, Tim.
Okay. And your next question comes from Michael Simotas from Jefferies. Please ask your question, Michael.
Hi, everyone. I'll ask the question on China. So the depletion number that you've given for June is clearly very strong. Can you just give us a little bit of color, please, around those depletions?
And in particular, if you're interested in things like how much of that is distributors clearing stock that's in the channel through promotion or other means, some comments around on-premise versus off-premise, as well as the type of wine that's driving that promotion in terms of, sorry, driving those depletions in terms of where they fit in the price spectrum, please.
Yeah. Good morning, Michael. I'll ask Tom to answer that question.
Thanks, Tim. Michael, yes. Look, obviously, we're very pleased with the recovery we've seen in depletions in Q4, particularly in June. At this point, we remain cautiously optimistic because we know things can change pretty quickly. In terms of what's been driving that depletion, particularly in the June number, is a return of people gathering together ultimately as a result of restrictions being lifted, venues opening, business and social occasions coming back, but not quite back to pre-COVID levels.
It's been across the board, across all channels. Obviously, in June, there is a big online shopping festival, the 618 Festival. That was a very positive part of our June performance. And it's across the portfolio as well. Not any specific part of our priority portfolio or any specific part of our business from a channel perspective. For us, we really need to wait and see what happens for Mid-Autumn Festival. We've got strong pull-through programs lined up across the portfolio. But I think it's fair to say customers are feeling pretty good about our brands because they are cash-generative for them. And we obviously will continue to invest, as we have done throughout H2, in our priority portfolio. Very pleased with how June came out, but remain cautiously optimistic looking forward.
Thanks, Tom.
I think, Michael, the other point I'll add to that is the point of your question around is it sort of liquidation of stock? I think you were getting that in the question. Yeah. We're certainly seeing that the pull-through of our brands is driving the depletions of our brands is actually similar in terms of channels and where we saw it pre-COVID as well. So yes, there's been the odd occasion of pricing dislocation on a couple of SKUs and brands, which has been quite isolated, to be frank, over the last couple of months. And I'm sure a number of the analysts on the call might have seen a couple of those things.
But Tom and the team are picking those up very quickly and also being very disciplined in terms of how we deal with and manage our partners through that process as well to ensure that the long-term or medium and long-term strength and health of our brands, which is driven in a large way by our pricing structures, continues to be managed effectively over time. Thanks, Michael.
Okay. Your next question comes from Niraj Shah from Morgan Stanley. Please ask your question.
Pardon me. Niraj? Oh, there we go.
Yep. Good morning, everyone. Just a question around the intake. Obviously, down significantly, particularly the luxury intake this year. Can you just give us a bit more color on the flexibility you have to, I guess, smooth out the allocation and how you can manage that?
Thanks, Niraj. Matt here. I'll take that one. So you're right.
We have talked a little bit in July and again today giving insight in terms of the 2020 vintage in Australia, down 30% overall. We did call out today luxury at a 45%. The value in our model, as we've also said, is that we are able to manage across multiple regions, but also multiple years as we do that. Some of the ways in which we do that, clearly, we allocate to multiple regions, and we release wines at the right time and spread that, whether that be through back vintages, whether that be through working through channels where vintage release is more or less important. Those are key flexible natures of our model that we see as an advantage.
You do see elements from us in previous years where we've done special releases or back vintage releases and the ability to continue to do that and plan for that over multiple years. But the core element of it is that clearly the luxury wine is sought after. It's sought after over multiple years from both collectors and immediate consumers alike, and that model allows us to be flexible in the way and the timing in which we release it.
Thanks.
Okay. Your next question just comes from Larry Gandler from Credit Suisse. Please ask your question, Larry.
Good day, Tim. Can you hear me?
Good morning.
Oh, great. Excellent. Thanks, Liz. I just want to come back to Asia.
Tim, Matt, in my assessment up there, it seems like in a number of regions and instances, Treasury's retail and wholesale pricing for Penfolds has come off since COVID, which sort of makes sense because there might have been some excess stock after Chinese New Year. I'm just wondering, you talked about it as being somewhat isolated. It doesn't feel that way. Can you sort of give us a feel for maybe where the average retail wholesale pricing you're seeing for Penfolds is and what that means for the long-term health of the brand? How are you guys trying to perhaps restore value for your retailers and wholesalers?
Yep. Thanks, Larry. Look, I'll headline that and then ask Tom to comment as well. I think it's important to hear from the guys in the markets as well.
I certainly don't believe we've had a widespread issue in terms of our hotel resale pricing across the major markets, across any of the channels they have. I firmly believe they have been isolated, and we've seen, particularly on some of the bin ranges, Bin 389 as an example. We know there's been pricing that's particularly on online channels that we would not want to see in that market and hasn't continued once we've actually got underneath how the stock has been received by some of these customers and partners within the market there in China, so from my perspective, our retail pricing is holding up effectively. We have not decided to take price increases this year. That's a really important point, which is something we've done consistently over the last five years, is take price increases.
But certainly, just to manage the market and ensure that we have a much better view given the uncertainty around the future demand profile, we just wanted to maintain the pricing structures as best we can until we have much better understanding of not only the pace but also the demand and recovery. Tom, do you want to build on that?
Yeah. I think to start with that, really important to clarify that obviously we don't control either retail or wholesale pricing in the market. And look, from time to time, we do see pockets of pretty heavy discounting. But often, that's driven by new or newer entrants into the market looking to drive footfall or traffic. And ultimately, those partners of ours will burn through their limited allocations on a pretty quick basis when they do go deep on discounting.
an evolution of our market management policy, we have a model where each of our partners have a defined territory and/or a defined channel scope as part of our annual agreements with them, and that's something that we've had in place throughout F20. Moving forward, and from the 1st of August, we've refined that policy whereby we're now putting in additional measures linked to some of our products that will only be available out of the Shanghai warehouse on a monthly basis where we'll be able to trade those products back to our direct customers, and ultimately, where we see people operating outside their defined contractual territories or channels, that gives us the ability to take recourse to those customers.
As we've said before, we're not afraid to make changes in our model where we don't have alignment strategically with any of our partners around our brand strategy and the execution of that strategy in the market.
Thanks, Tom. And so the last comment I'll make, Larry, just to sort of round out the question is this is a constant challenge and a constant focus for us, not only in China but also in other parts of Asia as well. So it's a high priority. And I think what Tom outlined is quite a significant step forward in terms of how we are managing the partner network within and the channel conflict that can potentially happen within the China business. So thanks for the question.
Thanks.
Okay. Your next question comes from Richard Barwick from CLSA. Please ask your question, Richard. Okay.
Thanks. Hi, Tim and Tim.
Tim, the way you were talking back on July 9th, I thought there would have been a very strong chance you might have sold one or more of your commercial brands in the US by now or been able to announce something. So what can you tell us now about the progress on that front and the prospects on actually divesting commercial brands like Coastal or Main & Vine, for instance?
Good morning, Richard. Nice to hear from you. I'm sorry to disappoint. I guess the progress, I'm really pleased with the progress we're making in the US in terms of how we're going about the options we have for either divestment or the, I guess, sort of shrinking of the brands that we don't see as our priority brands for the long-term growth of the US business.
I hope I was clear previously to say that the whole sequence of work we're doing in the U.S. started with the internal restructure, the internal cost management, the redefining of how we operate with our retailers and distributors going forward, which has been absolutely the number one priority through this last two or three months. And I think Ben and the team have done an outstanding job of delivering what is a significantly different resourced model within the U.S. business. And we're making the progress that we want to on the potential divestments of the assets and the brands. And we have multiple alternatives to do that. I mean, these things, it's a substantial piece of work we're undertaking. There's substantially different options we can take as we go down that path.
And we need to be very deliberate in terms of the sequencing of how we actually go about that to ensure a couple of things. One is that we continue to manage those brands effectively over the next period of time while we are seeking to reshape the business in the U.S. as well. But also, these things take time. And we've got to make sure that we're not going to either sell or divest these assets at any cost either. We need to ensure we get the right either price or the right operating model or the right exit strategy that adds value from both a shareholder and to our P&L as well. So it's a complex set of tasks we're undertaking underneath that strategy. So long story short, I am sorry to disappoint you. I actually think the progress we're making is very strong.
We're working pretty hard at it. No one wants to achieve that quicker than me, believe me. Or maybe Ben Dollard does. But I certainly have a very high priority. Hence why we've outlined it under our F21 real key priorities that we must, must deliver that shape of that business.
Can I just clarify, Tim, just on that? So I appreciate what you're saying. Obviously, it's balanced and there's a lot of moving parts in it. But is it your expectation that you will be able to actually divest some brands? Or is it too early to say?
It's too early to say. But certainly, where we sit at the moment, I do have the expectation we will be able to.
Okay. All right. Great. Thank you.
Wasn't it the second part? I do have the expectation we will be able to, Richard.
Understood. Thank you.
Okay.
Your next question comes from David Errington from the Bank of America. Please ask your question, David.
Morning, Tim. Morning, team. Tim, you've been the ex-supply chain guru. This is probably to you, but Matt might chip in as well. It's on the inventory. I can remember the intake in particular. I remember 2011 vividly when that was a really bad harvest caused by the opposite of what we had recently, drought and hot weather. This time, it was floods. And I remember vividly there was no 707 made at all. And you really had to scrounge around to get some Grange. Can you give a bit more color with regards to that 45% drop? Because the challenge is really in that iconic area, the Grange in the 707s where you produce it now 30, 40 bucks a bottle, but you sell it for 10, 15 times that.
Can you give us a bit of color as to what the intake has been for those iconics? Was it down uniformly with the 45%? Or were you able to perform better in those super iconics? So the drop may not be as detrimental to future profitability. And the second point, I'm really a bit confused as to how the value of the inventory can go up as much, yet the volume in luxury down. I would have thought because the mix, etc., the 45% drop in luxury, 30% total drop, yet the value still went up. That says to me that your COGS really must have gone up a lot, which worries me a little bit further for future profitability as well. So there's two prongs to that question. I apologize for that, but it's an important issue of mine.
Sure thing. No problems at all. Dan, good morning.
The first answer to the, I guess, the spread, if you like, of the vintage impact, I would assume and the best way to assume it without going into SKU by SKU basis is relatively uniform across the board. And so clearly, it was a challenging vintage right across the full portfolio of our luxury wines with that intake. The good news is, and I want to make sure it's landed, and I think everyone knows this, but as a smaller vintage doesn't mean quality is impacted. So it's certainly important to understand we make to that quality standard. And at times, that will mean lower vintages in terms of intakes. So it is pretty consistent across the board, David, in terms of what the mix of that reduction looks like.
I guess the other point I'd make around inventory, and I'll let Matt talk more around the balance between cost and volume and how the makeup of that inventory in what we've presented today is. But the key being from mine, and this is something you would normally not say, but I guess through the COVID period where we've actually sold a lot less luxury wine than what we planned to sell in the first half, if you're ever going to have a vintage intake that was lower on a luxury point of view, this was the year to actually have it because we can rebalance the future years to a degree based on that. So I'm trying to take a positive out of a negative there. I understand that fully.
But I guess one of my big concerns going into the COVID period when we realized what was ahead of us was what that meant for our future inventory positioning as well. And certainly, with the smaller intake, it's not going to create near an issue for us here in Australia. And I think as Matt outlined today, we've been quite transparent around other inventory provisions. And we feel like our balance of inventory, even with the COVID implications, is pretty strong across the board, that we can still grow consistently year on year, albeit it is a smaller intake. So that's how I'd answer the first part. May I let Matt tackle the second?
Yeah. Let me just help dimensionalize in terms of volume versus costs. I'm going to mix cost/mix. So clearly, we've called out that volume of luxury wine is down 5%.
There's two elements to that. Clearly, the vintage for 2020 was lower, 45%. Sorry, at a luxury level. Offsetting that was the carry forward of the vintage that we'd intended to sell in the second half of 2020. From a volume perspective, that's there. From a mix and cost perspective, yes, 2020 vintage has been a higher cost. That's because it's a lower-yielding vintage, which means the recovery of costs. That's one driver of it. The other driver is that normally we would have the 2020 vintage be bigger, and it would be early in its stage of production. It would be bulk wine. That's lower. What we've carried forward is finished goods from fiscal 2020. There's an element of the stage of production, which I'll call mix.
I am recognizing it is a higher cost vintage for the fiscal 2020 because it's a lower-yielding, and the cost of the winery, etc., will be absorbed at a higher rate. So there are a couple of dynamics there. Hopefully, we've helped clarify that.
The last point I'll add to it is I think it's, hopefully, we made it clear today as we recognize we've got a cost of goods challenge on our hands. There's no doubt about that. And the program of work we're putting in place to deal with that, we're partway through. And hence what we've talked about today in terms of the goals financially on that. However, we need to go stronger, harder than what we and we've got more work to do on that front. There's no doubt about that.
Thanks, Tim. Thanks, Matt.
Thanks, David.
Your next question comes from Andrew McLennan from Goldman Sachs. Please ask your question, Andrew.
Good morning, everyone. Maybe just following on from that, the global supply chain cost out of AUD 50 million that you mentioned. So Tim, are you saying that that's sort of been implemented to offset the issues that you've just referred to in terms of your increased cost of goods sold? Obviously, it'll have greater duration than one vintage. But I thought that was an interesting development in terms of the cost-out program. So if you could just talk through what the expectations are of that global supply chain cost-out and how we should think about it from a net basis as well as a gross basis.
Yeah. Sure.
I think the key with these global supply initiatives is it's not necessarily on the back of a we've had a challenging vintage cost out of Australian commercial wine, for example. It is essentially it's a program of work that you really, as a business, you need to do every three to four years at a minimum, I think, because demand changes, your infrastructure changes. I sort of like it as saying the train set you have from a supply chain point of view today is not going to be the right set of carriages in four or five years' time, and you always need to be continually reviewing that, so this is certainly one of the programs I was very keen to put in place as I took over the leadership that we go again in terms of that program of work, and it is broad. It is global.
It goes from how do we deal with their packaging all the way through to our infrastructure behind it as well. So we know the playbook you've got to go through with these programs. We've done it before. We think we know how to get these things done. And what we've highlighted today is an AUD 50 million-plus target that will be delivered based on the age of release of wines by F23. And that's just driven by financial years and how wine gets made and sold based on that age of release. But fair to say the supply chain team, no, they can, there's pressure to do more than that over the period of time as well.
Yeah. And I'll add to that. I recognize the fact that the 50 links to the 50 we talked about in July for this fiscal year.
But I'll dimensionalize that, what we talked about at July, that clearly there's elements of that, which is increasing Australian commercial cost of goods, but also the particular vintage that we've faced. So there are elements of that that are linked to this specific vintage that in a normal vintage would normalize out and not occur in future years. But as Tim said, this program of work, we had started it pre-vintage, pre-Australian vintage. It is a long-term piece of work that is part of the rhythm that we should always have. So they are slightly different, with the longer-term piece of work being a stable thing that should last us for a long period of time. And what we've talked about for COGS this year is a single vintage-related issue.
Okay. Thank you.
Your next question comes from Sean Cousins from J.P. Morgan. Please ask your question, Sean.
Thanks.
Good morning, all. Just a question regarding the ex-retail channel in the Americas. I think you highlighted the 12% of volumes and 25% of NSR in July. Could you just talk a little bit about what that is from an EBIT perspective in the Americas? And maybe if you can provide that breakdown in other markets. And maybe for Ben, where are you seeing that ex-retail market right now? And the path to recovery there, please.
I'll cover the first part and then hand over to Ben just to give a sense of where things are looking at the moment. You're right. We did give that color. We haven't broken that down at an EBIT level. But what I would share is that clearly they are luxury channels, particularly our direct-to-consumer business, seller doors in particular.
And they are strong businesses of ours in the U.S., particularly with the experience and the, I guess, the wine tastings, the cable car, and other elements, and the experience that you get in the U.S. business. So they are profitable. So they generate, from a shape of P&L, a higher gross profit and earnings there. We haven't shared that previously and don't intend to continue to do that today. But I take your point, and we'll think about it in the future. But they have been closed. So they are elements, just for everyone's understanding, they have been closed. They are profit pools that will come back to us as those channels open. Ben, did you want to give a sense of how you're seeing things on the ground at the moment in those channels?
Yeah. Sure. Thanks, Matt. Just a quick build on what you just covered.
I think we've obviously also seen an impact in our travel retail, particularly in Latin America, as the cruise line industry effectively has shut down, so that's been another consideration for us as well. We have seen a gradual opening of our visitor centers here in California, but that has been extremely gradual and evolving and remains quite fluid, but very clearly, our e-commerce platform, as part of both our direct-to-retail and also our B2B e-commerce platforms, have continued to be particularly strong opportunities for us, so we are cautiously optimistic as we think about the DTC component of our business opening back up, but certainly, as we have reimagined the business, we have also invested heavily in how we think about e-commerce as we move forward and building out a team to be focused on that space, so again, kind of cautiously optimistic as we move forward here.
And the ex-retail channel in other regions, Matt, please.
The primary focus clearly we gave at the same time was AN Z, which is the main driver. Europe is predominantly retail. So there's no point really breaking that one down. It's nearly all retail, all convenience and impulse. And Asia, we haven't shared that. It's a little bit more complicated to do that given the model that we have. But again, we took that sort of on notice. And it's something we'll continue to think about how we disclose that in the future. But our disclosures previously around, I guess, our customer base as opposed to channel is the best way that we've shared at the moment.
Great. Thanks, Matt. Thanks, Ben.
Your next question comes from Philip Kimber from Evans & Partners. Please ask your question, Philip.
Okay, guys. Just a follow-on around Asia.
It was obviously very positive to hear that depletions of 40% in June. But are you able to give us a sense of shipments? And do you expect a material lag between shipments and depletions in that market until things really return back to more normal levels?
Good morning, Philip. How are you, Matt? Yes. In terms of the shipments to our depletions plan, I mean, we are always going to manage our shipment plans based on replenishing to what the full depletions forecast looks like into China in particular. So is there a lag? I mean, there is a difference in timing, no question, because clearly our P&L and profitability is measured by what we ship into that market as well.
So we certainly manage very, very closely, particularly over the last four or five months, inventory levels with the pandemic in mind and in terms of cash flow challenges that potentially would come to some of our partners there in China. And I think we've been really disciplined with how we have shipped product to meet forward demand once we know what the forward demand is. So from that perspective, I think the process we've had in place won't change. If we see continual growth in the forward forecast that is in line with what we've seen across Q4 in Asia, then clearly our shipments will match that going forward with likely some lag as you see the replenishment cycles working. So it's probably the best way to answer that. That's just our normal processes.
Okay. Thank you.
Thanks.
Okay. We have a question from Ross Curran from Macquarie.
Please ask your question, Ross.
Hi, Tim. Perhaps a much softer strategic question. The wording around the potential demerger of Penfolds seems to have softened. And you've talked about a few other options that are available to the group. Can you give us a feel for how you're thinking around the Penfolds portfolio has perhaps moved since our last strategic update a couple of months ago?
Morning, Ross. The Penfolds work, and I will call it the separate focus work we've been doing because that's actually what it is. And I'm glad you asked the question because I think it's important to clarify a couple of these things. The statements we've made around the exploring of the Penfolds demerger is absolutely still on our agenda. All right? So I want to make that very, very clear.
We didn't announce that in April when I wasn't CEO, and all of a sudden, we're backing away from that. Now I am. That's not the case. As we've gone through the work, the diligence we need to go through, and I'm sure every shareholder would expect that of us as a management team and as a board, we need to ensure that what is the right operating model, including demerger as an alternative, to grow our business the most effective way going forward. Now, clearly, when we announced this in April, we also didn't expect to still be in the middle of a global pandemic. So have we actually slowed some of that work down to focus on the current business today? Absolutely, we have. Are we actually walking away from it? Absolutely not. Yeah.
The divisionalization alternative that I put into the presentation today, if you think about a demerger, a sensible first step would be to actually set up your business as it is today in a divisional structure that allows you then to manage the change program of a demerger to ensure that you take a stepped approach to achieving what we're trying to achieve here, which is ensuring we have the right operating model to grow the business with a separate focus. And then what the structural outcome of that looks like will also come down to that growth ambition, but also to create the shareholder value that we seek to create as part of this work. So hopefully, the sequence, and I'm going to keep using this term, I suppose, there's a sequence of events you sort of go through.
To me, it's a softening of the language, so to speak, is just to try and explain the sequencing we would go through. I'll be frank. I don't feel time pressure to make this decision because it's a serious, it's a big decision. The board and I are in constant conversation around it. We'll continue to update as we feel we need to as we move through that sequence of events, so hopefully, that gives a bit more color. What I tried to do today with the slide in the pack that we talked to was just explain the rationale behind it because that separate focus and what the two portfolios, and when I say two portfolios, Penfolds, which is essentially five tiers under an umbrella luxury brand, is different on so many different fronts versus the broader portfolio we have across the remaining TWE.
So that's the intention to try and show that today, some of the thinking and rationale. Hopefully, that gives you a bit more color and hopefully clarifies some of the—I think some of the confusion and certainly some of the questions I'm sure investors and others have in their mind at the moment.
Thank you. And we have another question from Aryan Norozi from UBS. Please ask your question.
Hi, guys. Just two-minute ones, maybe. In your second half, Asian volume fell down 38% year on year. Can you just please give us an idea around how the trend sort of progressed third quarter versus fourth quarter year on year, particularly June, like you've given the color and depletions? And what's the driver of raising the higher EBIT margin target into the high 30s versus previous guidance, please? Thanks.
It's an interesting question in results where I feel like we've given quite a lot of detail to go into quarter by quarter. I don't think I'm ready yet. So I'm going to hold on that one. The key message I think that Tim and Tom have both given is clearly we entered into Q3, approaching Chinese New Year, and the challenges with COVID-19 on those channels created a new challenge for us to work through.
And throughout Q3 and Q4, we have been observing depletions, working closely with our customers and making sure that they have been matched as our customers have needed to work through that as well and to give us confidence of a strength of market to grow from, which I think the confidence across Q4 depletions of flat to then growing is a good data point for us to feel confident or to grow our cautious optimism on there as well. And sorry, the second part of the question was around the target. So clearly over the past few years, we have delivered high 30s, even 40% this year in terms of our EBITS margin.
The message you've heard consistently from us is that we've guided to 35% plus because of an intention to grow masstige wine in that market, which may grow the profit pool but reduce the EBITS margin and change some of the metrics. And it's just been to flag that. As we look out longer term right now, we feel we can actually maintain that high level of EBITS margin whilst growing both masstige and luxury brands. So it's recognising that now that we have a stronger visibility of our portfolio and growth, etc., for that market, that's why we've lifted and raised that margin for everyone.
I think the other key part of that is that we've delivered, call it 38% plus EBITS margin for multiple halves in a row now, even in the last half.
So having a 35% plus target, which we've stated for a number of periods now, can sometimes be mistaken as a downgrade to your current performance, which is what we wanted to avoid as part of this, to be frank.
Okay. Thank you.
Okay. There are no further questions at this time. I'll now hand the conference back to your presenters for any closing remarks.
Great. Thank you. Thank you, everybody, for joining us.
I hope what today gave you was a more expansive, I guess, understanding of how we're managing the day-to-day and managing the challenges we have in the business, but also, I think, importantly, reminding everyone around the fundamentals of our business and the forward plans and how we're driving those two-speed agendas, as I like to call them, and also giving you some insight and introduction to the broader leadership team because at the end of the day, that's what it all comes down to. So appreciate everyone's time and interest and look forward to numerous discussions over the next couple of weeks. Cheers.