Foley Family Wines Buys New Zealand Wineries; Wither Hills Not for Sale
The significance of the investments into the New Zealand wine industry by multinational companies has been highlighted during a busy few weeks of New Zealand winery sales and rumors of sales.
Wither Hills winery in Marlborough
In recent weeks, California-based Foley Family Wines purchased the five-winery portfolio of the New Zealand Wine Fund and Lion Nathan was incorrectly reported to be selling off Wither Hills winery in Marlborough.
Foley Family Wines Makes New Zealand Purchase
The Foley Family Wines purchase of the New Zealand Wine Fund, an investment group with a six-brand portfolio, came as a surprise because the company was not previously known to be available. However, some of the roughly 30 investors into the fund were investigating a sell of their shares when Foley Family Wines principal Bill Foley made an offer for the company.
The New Zealand Wine Fund winery properties include Vavasour, Clifford Bay, Goldwater, Boatshead Bay, Dashwood and Redwood Pass. Though the wineries are located in various regions throughout the country, production is largely focused on Marlborough wines.
The purchase includes over 100 hectares (about 247 acres) of vineyards, 85 percent of which are Sauvignon Blanc. Current sales are about 280,000 cases per year, but production has been ramped up to 350,000 cases in recent vintages, said Peter Scutts, managing director of Vavasour winery, the largest of the purchased wineries, as well as an investor in the Wine Fund.
"Mr. Foley was interested, as I understand it, in acquiring a New Zealand company that focused on Marlborough Pinot Noir and Sauvignon Blanc," said Scutts.
Financial details of the purchase were not disclosed.
The New Zealand Wine Fund was established in 2002, purchasing the highly regarded Vavasour (which also produces the Dashwood and Redwood Pass labels) for a reported price between NZ$10 to NZ$15 million in 2003 ($5 to $8 million in 2003 dollars). Vavasour is based in Marlborough's Awatere Valley and focuses on the region's iconic Sauvignon Blanc as well as Pinot Noir, Chardonnay, Riesling and Pinot Gris.
In 2006, the group purchased Goldwater (which also produces Boatshead Bay) for a reported price in excess of NZ$10 million (about $7 million in 2006 dollars). Goldwater is one of the country's oldest wineries, established in 1978, and is based on Waiheke Island, just off the coast of Auckland. The winery's estate vineyards on Waiheke Island produce Cabernet Sauvignon, Merlot, Cabernet Franc, Syrah and Chardonnay. The winery also has some production from the Marlborough region, where the company has one-third ownership (along with Babich Wines and Matua Valley Wines) of the Rapaura Vintners, one of the largest production facilities in the region.
Also in 2006, the Wine Fund acquired the well-regarded Clifford Bay winery for a reported price of about NZ$10 million. Like Vavasour, Clifford Bay is also based in Marlborough's Awatere Valley. The estate-grown wines include Sauvignon Blanc, Pinot Noir, Riesling and Chardonnay.
The collection of wineries is expected to immediately benefit from Foley's established relationships with distributors, gaining access to U.S. markets where they may have previously been denied.
Scutts, who began his New Zealand wine career with Pernod Ricard's Montana winery, feels international investment is a positive for the country. "It's a real complement that someone who's interested in the wine industry is interested in New Zealand," said Scutts.
"I think some international ownership is great for everyone else, because their brands can ride on the coattails of the benefits for New Zealand and brand Marlborough," continued Scutts. "One of the things I think about Mr. Foley is that he is going to become a huge fan of New Zealand wines and Marlborough wine in particular, becoming an ambassador for our wines in the U.S."
According to New Zealand Winegrowers, the industry trade organization, about half of New Zealand production is under control of internationally-owned companies.
Lion Nathan Not Selling Wither Hills
Confusion over an Australian stock exchange filing this week led to several reports that Marlborough's Wither Hills winery was up for sale.
"The report is incorrect," said Geoff Matthews, general manager of Wither Hills. "That was something that got right out of hand. It was basically a reporter that misread an independent expert's report about the company. At this stage, the company remains committed to Wither Hills. I don't think that will change in the future. In fact, I have more confidence now that it will be the exact opposite."
The confusion stems from the ongoing A$3.5 billion ($2.9 billion) sale of Australian drinks company Lion Nathan to Japanese conglomerate Kirin. A filing was made this week made in advance of the sale, including an independent review and endorsement of the proposal by Lonergan Edwards & Associates.
As reported by Bloomberg News, the filing also included a plan for Lion Nathan to sell as much as A$29 million ($23.4 million) of wine assets in Australia and New Zealand. The sale would include A$18 million ($14.8 million) in inventory and a number of vineyard properties. It is unknown at this time what properties are targeted or if the sale will be completed.
For their part, Kirin has signaled that they currently have no intention to make major changes to the Lion Nathan business, at least not until the completion of an internal review once the sale is completed.
Like many Australian wine companies, Lion Nathan's wine division is struggling, with sales down 56 percent in the first half of the financial year. Lion Nathan has previously indicated a reluctance to sell the wine division because of current economic conditions as well as the unsettled nature of the Australian wine industry.
In addition to a number of beer and liquor brands, Lion Nathan has a nine-winery portfolio of mostly Australian wines, including the Petaluma brand, but also includes Wither Hills in New Zealand and Argyle in Oregon.
Like Scutts, Matthews also sees the international involvement in the industry as a positive for New Zealand wines. "It shows that Marlborough Sauvignon Blanc has some real brand equity," he said. "To a certain extent, it's important to the continued growth of Marlborough and New Zealand wines. It's important to have some international ownership because it really opens up the avenues to international markets. It's in the international markets where we can really build the reputation of Marlborough wines and New Zealand wines."
Wither Hills had previously been exported to the U.S. via Beam Wine Estates. After that company's sale to Constellation Brands, Wither Hills was left in a bit of limbo. Matthews reported, however, that the winery has recently regained access to the U.S. through Lion Nathan's distributor relationships.
Lion Nathan investors are scheduled to vote on the Kirin merger in mid-September. Kirin currently owns 46 percent of Lion Nathan and is looking to buy the remaining 54 percent. Kirin plans to merge Lion Nathan with its Australian dairy processing company, National Foods, in a company to be known as Lion Nathan National Foods.