In a year that brought significant growth and expansion for winemaker Delegat Group, managing director Graeme Lord says the company is poised to bring its wine to the world.
On Friday the Auckland-based company reported a record operating profit of $20.5 million for the six months ending December 31, up 2 per cent from $20.2 million in the previous corresponding period, after a 4 per cent rise in global case sales to 1.13 million.
Delegat sold more than two million cases of wine last year and recorded an operating profit of $31.4 million - a record performance for the company. Lord said they were on track to reach full year goals for 2015 of 9 per cent growth with expanding new markets and North America in particular.
"Our main market now, for the first time, is North America," Lord said.
"So the US and Canada together became our biggest market in the financial year 2014. That market is big and growing and we think that the US and Canada combined will be the growth engine for the company over the next five years," he said.
Lord said he was expecting sales in North America to more than double to over 1.4 million cases, which he said would contribute strongly to the company's five-year goal of growing the business by more than 50 per cent.
Delegat was unusual in that it owned a large proportion of vineyards used to supply its grapes, compared with a lot of other wine producers of its size which he said often used predominantly supplied grapes.
"We've invested a lot in vineyards and wineries, a lot of capital expenditure, to keep up with growth," Lord said. "Company vineyards would be around two thirds of our total [grape supply] and the other third would be long-term grower partners so we have a much higher level of company vineyards than a lot of other companies would have, and that for us is really important to underpin long-term supply and also quality of our product."
Ensuring the quality of its wine led Delegat to purchase Australia's Barossa Valley Estate in 2013 for A$24.7 million - a well-known region for its red wine. Lord said the addition of Barossa Valley to its vineyards in Marlborough and the Hawkes Bay gave the company scope to produce more varieties of wine from some of the best regions.
"We tried to identify the regions that we thought were truly world-class producers of that singular wine style, that variety, so that's why we have vineyards in multiple regions and why we've gone down that path," he said.
Delegat Group won the Best Growth Strategy at the Deloitte Top 200 Best in Business Awards late last year.
New Zealand wine has been highly regarded in global markets, and Lord said this appreciation and recognition was continuing to grow, particularly in the sauvignon blanc market. However, he said this also provided a challenge for New Zealand wineries.
"The challenge we have is to be recognised for the quality of the wines beyond sauvignon blanc, so we're producing world-class chardonnay, merlot and pinot noir but at the moment as an industry, we're a bit under-recognised for those varietals," he said.
Lord said despite this, the company was tracking well and was set to expand sales teams in some of its newer global markets. He said the company would continue to focus on expansion in its North American market, as well as building awareness and reputation for its wine in China and Japan, which Lord said provided another significant market opportunity.
Delegat posted a 45 per cent drop in first-half net profit, mainly caused by a $10.7 million write-down of its vines and grapes and losses on derivative instruments used to limit its foreign currency exposure.
Net profit was $9.77 million for the half year, which included fair value adjustments of $3.1 million for its vines, $7.5 million for its grapes, and $4.3 million for derivative instruments. That compared to a profit of $17.8 million a year earlier.
Sales revenue gained $4.4 million to $125.6 million on the prior period, offsetting foreign exchange rate changes which resulted in a 1 per cent drop in case price realisation of $111.30, compared with the $111.90 achieved last year, the company said.
- additional reporting BusinessDesk