December 8, 2020

By Lynda Kiernan, Global AgInvesting Media

New Zealand Super Fund has acquired four vineyards – Confluence, Brackenfield, Willow Flat, and Medway – from Yealands Wine Group for NZ$34 million (US$24 million). 

The four properties total approximately 187 hectares (462 acres) planted primarily in Sauvignon Blanc and Pinot Noir, and will now be run by FarmRight, manager of the NZ Super Fund’s rural portfolio in New Zealand.

“We’re pleased to have acquired these four vineyard sites,” said Megan Glen, NZ Super Fund Direct Investments. “The properties are a valuable addition to our growing portfolio of rural land across New Zealand, which we see as providing diversification benefits to the Fund and will allow us more access to the successful New Zealand viticulture sector.”

Although many details of the deal were not disclosed, the terms did include a long-term supply agreement and an offer of continued employment for Yealand’s employees from FarmRight, and mention that Yealands’ sustainably produced brand portfolio will remain unchanged.

“The Yealands brands are well placed,” said Tiffani Graydon, CEO, Yealands Wine Group. “Consumers want great quality, sustainable products and ours is a compelling story of Kiwi entrepreneurialism that resonates strongly with consumers around the world. Premiumisation of the Yealands range internationally is a significant part of our growth plan and the results in market since our brand reset last year give us real confidence that we’re on the right track.”

As a whole, New Zealand’s vineyards are expected to harvest 39,935 hectares (98,681 acres) in 2020 – a 2.4 percent increase over 2019, according to the U.S. Department of Agriculture (USDA). Wine production for the country is also expected to show an increase year-on-year, with production forecasts of 316.3 million liters for the year – 6.4 percent above the previous year. 

Over the past five years the sector has experienced steady growth, and a further 640 hectares (1,581.5 acres) are expected to come into production during 2021. For four of these past five year, demand (both domestic and foreign combined) has exceeded supply leading to year-end stocks for 2020 expected to be only 40 percent of the following year’s demand.

Like most sectors we discuss, COVID-19 and the restrictions associated with the pandemic have had an effect on the country’s wine producers. Driven greatly by exports, and bolstered by nearly perfect growing conditions, the sector actually saw record exports for the year ending June 30, 2020 valued at NZ$1.92 billion (US$1.3 billion), and domestic sales valued at NZ$500 million (US$339 million). 

However, social distancing, a lack of tourism, and a huge hit to in-person sales have taken a toll, and despite “incredibly strong” demand from the UK and Europe, Yealands saw profits take a  hit.

The company’s initial positive results for H1 2020 saw a reverse with the total number of grapes processed falling by 6.1 percent to 20.746 tons, and sales falling by 2.6 percent to NZ$102 million (US$71.8 million), according to its parent company Marlborough Lines, that noted that Yealands did not pay out a dividend to its parent company explaining it was in order to “focus on increasing liquidity within Yealands in uncertain times”.

With the capital from this divestment, Yealands Wine Group plans to reinvest in its business with its sights set on becoming globally recognized for sustainable winemaking; to achieve a level of financial stability in support of accelerated growth; to undertake internal systems upgrades; to support the company’s global teams and customers; and to reduce debt.

Company CEO, Graydon said, “Capital from the sale will enable us to accelerate our premiumization plans and global growth strategy while retaining quality supply. The funds will be used to invest in brand growth in the US, UK and Europe, and with the vineyard development we’re undertaking in the Awatere Valley, this will result in a considerable net gain in supply for the future.”

The acquisition gives NZ Super not only needed diversification and exposure to the country’s viticulture sector, but the opportunity to deploy patient capital to effect value-addition in the long-term.

“As a long-term investor, we can continue to add value to the properties through the application of patient capital and high standards of operation and governance,” said Glen. “We look forward to working with Yealands Wine Group, through our farm manager FarmRight, with a particular focus on supporting sustainable practices.”

– Lynda Kiernan is editor with GAI Media, and is managing editor and daily contributor for Global AgInvesting’s AgInvesting Weekly News and  Agtech Intel News, and HighQuest Group’s Oilseed & Grain News. She is also a contributor to the GAI Gazette. She can be reached at lkiernan@globalaginvesting.com.