Wednesday, December 14, 2011

Industry Blues not for Murdoch James

In the past 2 years, the New Zealand wine industry took a hammering from low priced competition, high exchange rates, the global financial crisis, over-production, high gearing, and banks not making credit available (interestingly these were the same banks that 4 or 5 years ago were throwing money at vineyards, but that's banks for you). The situation led to commercial practices (like bulk wine sales) that had a negative industry wide impact. Now the industry has to try to reverse the consequences of this 'perfect storm'.

Excavations for new winery underway
While not specifically structured to address the concerns raised above, a recent strategic review conducted for the wine industry by a firm of consultants, did touch on some of the points. Where they did, the review's observations on market potential and market development were not exactly earth-shattering.

It is difficult to find the detail in the midst of all the consulting jargon, but one observation was that China is a desirable market for New Zealand wineries wanting to grow their exports. Paying someone to tell us that China has big potential for NZ wine sales is not exactly a big return on the investment. The important point is that if wineries are just discovered Asia now, they have missed the boat; and late-comers will find it hard to make up lost ground.

That is why Murdoch James has not been sitting back and waiting. We have been travelling in Vietnam, Hong Kong, Japan, Singapore and China for the last 3 years, and the results justify all the effort. We will sell more wine in China in the month of February 2012 than our full year's output just 3 years ago. And through new ownership, Murdoch James has recapitalised to escape the financial problems holding back other wineries from participating in the huge growth of wine sales in China.

The foundation trenches for the concrete
footings are huge
The consequences are clear if you call by the vineyard. As mentioned in a previous posting, we have already spent a great deal on expanding the Cellar Door and on landscaping. Now we have commenced our winery expansion project. As the images show, it will increase the footprint of the winery significantly - about 3 times larger actually. This will enable us to process the much larger quantities we need for our new customers in Asia.

A mountain of steel reinforcing should
ensure no earthquake risks 
And it also equips us well for our existing buyers in Australia, USA and UK, because this expansion is not just about processing more quantity, it is also about investing in the equipment and technology to take a huge step up in quality.

If you are ever nearby, come and check out what we are up to. We would be pleased to show you around!