Winery closure 'won't be last'

The closure of a Hawkes Bay winery is a symptom of the tough times facing the sector and there is potential for more shutdowns across the country as firms rationalise their winemaking operations, an industry analyst says.

Pernod Ricard New Zealand, the local arm of the French liquor giant, yesterday confirmed it is closing its Hawkes Bay Winery in Napier, saying it will consolidate its manufacturing operations in the region at its Church Road Winery, in nearby Taradale.

Deloitte partner Paul Munro said wineries had been under a lot of financial pressure for several years and other companies might consolidate their winemaking operations to cut costs.

"It's going to have to happen for the industry to reposition itself on a financially sustainable basis," Munro said.

"There is plenty of financial pressure in the sector and like many commentators we've been suggesting there needs to be some consolidation, rationalisation or collaboration."

Pernod Ricard managing director Fabian Partigliani said that the Hawkes Bay Winery had been "significantly under-utilised" since the company sold a dozen brands, including Lindauer and Corbans, to brewing giant Lion and its joint venture partner Indevin in 2010.
"As a company operating in a highly competitive market, our strategy is to focus on growing core brands through strong brand investment and innovation supported by an efficient, flexible and cost-effective operational base."

Partigliani said the Hawkes Bay Winery would close at the end of this month.

The company was planning to invest new capital into Church Road, which was a core strategic brand for Pernod Ricard, he said. The amount of cash being invested into Church Road was commercially sensitive.

Asked whether any redundancies would take place, Partigliani said the consolidation would "have an impact" on 13 full-time employees.

Munro said a major difficulty facing wineries, particularly the medium and large-sized operators, was their ability to generate returns in export markets.

New Zealand wine was typically positioned at the top end of the market overseas and in tough times many consumers had become less prepared to shell out on premium products.

"Rather than buy nice, high-quality New Zealand wine they'll buy lesser quality wine from somewhere else."

Wine writer Michael Cooper said the closure of the Hawkes Bay Winery was an extension of the firm's "retrenchment from Gisborne" which took place in 2010 when it sold its Gisborne winery to Indevin.

"[Pernod Ricard] seem to be increasingly focusing on Marlborough," he said.

The Hawkes Bay Winery, formerly the Corban's Winery, came into Pernod Ricard's possession after the French company's acquisition of Allied Domecq, its British competitor, in 2005. In 2001 Allied Domecq acquired Montana, which had in turn acquired Corbans in 2000.

Pernod Ricard's New Zealand business reported a turnover of $258.5 million in the year to June 2011, down from $337.2 million in the previous year.

The company made a gross profit of $77.3 million, down from $92.1 million in the previous year before impairments.

PERNOD RICARD NEW ZEALAND
* Formed after Paris-based Pernod Ricard acquired Allied Domecq, which had previously acquired Montana wines, in 2005.
* Employs 600 staff across New Zealand, with operations including wineries in Hawkes Bay and Marlborough and a bottling plant in Auckland.
* Brands include Deutz, Jacob's Creek, Church Road and Brancott Estate.