Christopher Adams

The Business Herald’s markets and banking reporter.

Cheap wine changing Kiwis' drinking purchases

Rory Glass, managing director of Lion Breweries. Photo / Natalie Slade
Rory Glass, managing director of Lion Breweries. Photo / Natalie Slade

Transtasman drinks maker Lion's new boss in New Zealand says cheap wine resulting from grape oversupply is changing this country's liquor market.

"The beer market has been in slight decline for a number of years," said Rory Glass, 39, who officially became managing director at the brewing firm last month, replacing Peter Kean.

"It's declined at 2 per cent [annually] on average for the last five years from a volume perspective, but the positive side to that story is that there has been some value growth. People are trading up to more premium [beer] brands."

Conversely, he said, wine sales had grown at about the same rate.

"A lot has been driven through some reasonably [low] pricing in the wine market, due to the oversupply."

The 2008 vintage's 285,000 tonne crop resulted in a 27-million litre glut - eroding wine, land and grape prices.

"Cider is probably the latest innovation play that's been significant," he said. "In terms of the alcohol market, it's grown by 80 per cent over the last two years."

Cider had until recently been viewed as an old-fashioned drink.

"What the Mac's Issacs cider [brand] has done is get people to reappraise the cider category," he said.

Glass said the firm had benefited from investing more than $350 million in New Zealand over the past three years. The company spent $250 million getting its new East Tamaki plant - affectionately known as The Pride - up and running.

Late last year it acquired 12 brands off French-owned Pernod Ricard NZ, including Lindauer sparkling wine.

But seismic activity has made this year a challenging one for the 150-year-old brewing firm. Glass said Lion's Christchurch brewery was damaged beyond repair in the February 22 earthquake. "The brewhouse and the packaging hall - which is effectively the heart of the brewery - sustained unbelievable damage. The brewhouse sank about 10cm into the ground."

Since its closure, Lion has had to truck products north from its Dunedin plant and south from Auckland.

The Pride had had to start brewing brands it never brewed before, such as Guinness, and had been running at full capacity - 180 million litres annually - which it usually never got close to at this time of year, Glass said, which had added cost to the business.

In May, Lion announced a $43 million investment in New Zealand, which will see $20 million spent on Dunedin's Speights brewery to boost capacity by 250 per cent, a $15 million new warehouse and distribution centre built in Christchurch and $8 million spent on increasing other-brand brewing in Auckland.

Lion Nathan was acquired by Japanese firm Kirin in 2009 and merged with Australia's National Foods as Lion Nathan National Foods. It was rebranded as Lion this year.

- NZ Herald

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