Lion snares Marlborough jewel

By SIMON HENDERY

When the world thinks New Zealand wines it usually thinks Marlborough sauvignon blanc.

The website of winemakers and grape-growers lobby group New Zealand Winegrowers gushes that this country's sauvignon blanc "is acclaimed throughout the world as the definitive benchmark style for the varietal. Its exuberant, pungent flavours have dazzled wine critics everywhere".

And while it is only one of thousands of international benchmarks which could be plucked from an award-obsessed industry, the latest annual international top 100 list from United States-based Wine Spectator magazine included four New Zealand picks - all of them Marlborough sauvignon blancs (Thornbury, Cloudy Bay, Brancott and Lawson's Dry Hills).

So when transtasman brewer Lion Nathan decided to diversify into the premium wine business last year, it was not surprising that it signalled its interest in picking up a Marlborough vineyard to complement its South Australian wineries, Banksia and Petaluma.

This week it announced it had picked up the jewel it has been looking for - the Wairau Valley's Wither Hills, one of Marlborough's larger wineries.

Established in 1994 by winemaker Brent Marris, Wither Hills is expected to produce 80,000 cases of wine this year, 70 per cent of which will be sauvignon blanc.

Production is expected to grow to 100,000 cases next year.

It also produces chardonnay and pinot noir on 150 hectares of planted land. A further 150 hectares is available for future planting.

The award-winning winery came at what appears to be a hefty price - $52 million.

But Lion's investor relations manager Warwick Bryan says at about 10 times annual earning before interest, tax, depreciation and amortisation, the business was cheaper than Petaluma (15 times earnings) and slightly more expensive than Banksia.

"If you look at land prices in Marlborough most people would suggest we have paid a fair price for it.

"What you've got to remember is we're not buying assets here that are bottom of the range. This is a premium wine business with arguably one of the best sauvignon blancs in the world.

"In addition to that it has a big land bank. The problem with the business right now is supply constraint - it can sell everything it can produce. So in that environment having a large land bank allows you to grow production."

Bryan says Wither Hills' product fits with Lion's Australian brands.

"It's consistent with our philosophy of having a portfolio of premium wines from Australasia."

Wither Hills sells about a quarter of its wine in New Zealand but growth will focus on exports because "growth demand in the domestic market is not great".

Lion will not consider changing the winery's brand, and part of the deal is that Marris will continue to run the business while his father, viticulturist John Marris, retains responsibility for all the company's viticultural operations.

"Wither Hills is a fantastic brand with a great reputation. A major reason we bought it was the brand and the continued commitment by Brent."

The winery's main markets are the UK, Germany and Australia. Brent Marris said most distribution channels would stay the same under Lion. Wither Hills would gain from its marketing, distribution and management resources.

Ironically, New Zealand distribution is handled by Montana, the country's largest producer, which Lion fought a bitter and unsuccessful battle with UK drinks giant Allied Domecq to acquire in 2000.

The domestic agreement with Montana would not change, Marris said, but Lion would help push Wither Hills' next expansion - a push into Australia and the US.

Wine Growers chief executive Philip Gregan said Lion's acquisition of Wither Hills should be seen as a natural progression.

Having undergone a period of increasing production, the next stage for New Zealand wine companies was to increase distribution and overseas marketing.

Lion would provide Wither Hills with those resources - just as Australian wine giant BRL Hardy had done for Nobilo Wines after buying the country's third-largest winery. Brewer Fosters had done the same for Matua Valley Wines.

Witherhills

Lion Nathan

New Zealand Wine