Winegrowers could find themselves left in the lurch following the sale of Hawke's Bay wine giant Sileni Estate, and one grower says a law change is needed to stop it happening again.
Earlier this week Sileni Estates secured a buyer for its Hawke's Bay business, with New Zealand financial services company Booster coming on board, with the business now operating as Sileni Wines Limited Partnership.
However, former Sileni grower Chris Howell said because the purchase only included a portion of the whole operation, growers in both Hawke's Bay and Marlborough had been left as unsecured creditors.
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"The Sileni sale has finally galvanised my thoughts on a Hawke's Bay industry that appears to be in good health from the outside but has some issues within."
Howell said he was disappointed with the way the fall-out from the sale was handled.
"In reality, we were told six weeks ago that our supply contract was to be cancelled, with no recourse to compensation.
"While fruit supplied in the 2018 vintage would be paid for [and has been], there was no room in the new business for some contracts or money left for buying out growers from ongoing contracts, even though money had already been expended in pruning the vineyards for the 2019 vintage. This was a fait accompli, not a discussion."
Some fruit that growers had expected to be taken by Sileni would now have to be targeted elsewhere, which was not an easy task as many were grown specifically and solely for Sileni wine varieties.
"I've been involved with the company since it started, so I've had a very long relationship with Sileni Estate.
"For me personally, they have ended up being quite a small client - only a hectare or so - but for a lot of growers, it's substantial amounts.
"For one grower it's about 10ha. So, you're talking significant amounts of income - five or six figures - in terms of gross income from those blocks.
"In the wine industry, the winery is in control of what happens to the grower supplier, as most wineries are in charge of pricing and contracts (there are some exceptions where it is more equitable). It is high time that businesses and directors were stopped from hiding behind limited liability structures where they can wilfully walk away from contracts with little or no consequences.
"The law needs to change so that contractors in any sector that are currently unsecured can register their contract on the Personal Properties Security Register.
"Sileni is another example of small business people bearing the brunt of a large company failing."
Responding to Hawke's Bay Today, Sileni Estates chief executive Nigel Avery confirmed six growers would no longer be supplying fruit.
"The new owners only sought to purchase or assume the parts of the existing business that could be operated profitably. The severe headwinds in our Australian market led to overcapacity in our New Zealand production operation which meant that, regrettably, the future supply of six growers was no longer required.
"The new owner purchased all brands and physical assets of Sileni, as well as undertaking to pay all creditors for amounts owed up to the date the transaction was settled. No grower has been left out of pocket in this respect."
Avery said four of those growers' contracts had previously expired, and the remaining two growers' contract termination notice was dictated by the timing of the company's purchase settlement date.
"Sometimes in business things do not to go to plan and, unfortunately, in this case, neither the former Sileni business or its shareholders had the financial resilience to weather the Australian market downturn combined with the negative impact of a strong New Zealand dollar at the time."