Te Kairanga's vision as big as Texas

CATHERINE HARRIS

Bruce Clugston is a man who clearly enjoys a good wine. He reckons he's tasted just about every sauvignon blanc in New Zealand.

"After 30 years, I've spent my whole life either selling wine, tasting wine, or as a buyer. When I was in retail, like most good- quality retailers, you've always got to taste the wine you're going to sell to your customers. I've tasted so many wines, I couldn't list them."

Mr Clugston, a former wine retailer and distributor, now owns his own wine company, Wineinc, and is president of Foley Family Wines New Zealand, which is majority-owned by United States billionaire Bill Foley.

The company owns several eminent Marlborough wine brands and plans to add Martinborough winery Te Kairanga to the list.

Although the purchase has not yet been sanctioned by the Overseas Investment Office, the winery's shareholders have al ready given it overwhelming approval.

Chairman Roger Taylor says the company's strong overseas links will undoubtedly open doors.

"They will be able to achieve the sort of brand strategy that we always wanted to achieve and which is very hard for New Zealand companies to do."

It's no secret that Te Kairanga was losing money. Wine is a capital-intensive industry and debt and low prices were hitting "TK" hard. Last year, Te Kairanga made an operating loss of $2.7m, reflecting what its part-owner Rangatira called "extremely difficult conditions" in the industry. Te Kairanga's bottom-line loss was $4.8m after a 21 per cent writedown on the value of its vines.

Mr Clugston wants to get the winery back on track. The Foley Family Wines New Zealand base will move from Marlborough to Martinborough and the overseas consumer who may have only heard about Marlborough sauvignon blanc will be hearing a new story about Wairarapa reds.

"I think we can now tell them we've got the John Martin [reserve pinot noir], which Martinborough was named after. We are in Martin's Rd, Martinborough, and we can play that to the hilt.

"[With] that whole Foley empire of marketing, we should be really able to create a bit of excitement about Martinborough, which I think is really exciting, because I think it's the premier [pinot] region of New Zealand, along with Otago," Mr Clugston says.

The merits of buying TK were never in question, but getting the synergies right with the company's other wineries was.

For that he took the advice of Bill Foley, who recently bought a majority share in the Wairarapa luxury resort Wharekauhau.

The two men met after Mr Clugston secured a big supermarket deal in the US and was advised to look outside Australia for an equity partner.

Mr Clugston often travels to the US, so he dropped Mr Foley an email.

Three weeks later, he heard back from the Californian-based magnate, who said he should drop in for a coffee.

Several hours of conversation ensued. By the end of the next evening, Mr Clugston had a deal done on a handshake.

"One thing I've found is that the Texans, of all the Americans, are most similar to Australians. And Bill being a Texan, I found that he was very much like the people I'm used to dealing with - very honest, upfront, frank, direct, and all those things.

"I've found him to be a remarkable man of his word . . ."

Wineinc took a 6.5 per cent stake in Foley Family Wines NZ and FFWNZ bought a third of Wineinc. The arrangement added Australian big reds to Mr Foley's portfolio of New Zealand cool climate and Californian labels and gave Mr Clugston access to the Foley family's formidable distribution clout.

He expects to double Wineinc's sales in the US over the next 12 months.

Mr Clugston says it's ironic but, as far as he knows, Mr Foley loves New Zealand but has never made the short hop further to Australia.

"Bill loves New Zealand, absolutely. Bill's a Texan, he's a wildlife man, he's a country boy at heart and his favourite place to be is Montana. That's where he likes to go and he's got a property under the glacial lakes . . . and when he comes to New Zealand, he sees the same thing."

Under Mr Clugston's gaze, it's likely Te Kairanga will adopt a more consumer-focused strategy.

Mr Clugston started out in his 20s with one Sydney liquor store, building it into a successful chain.

Eventually he began his own distribution business, with a sideline in old and rare wines. But he found that the harder he worked for the wine labels, the more likely he was to be dropped once they became successful.

"That's why in 2004 we decided to start making our own wine because I thought at least if we're making our wine, if we're good at it, we're never going to lose the agency."

Currently, he contracts growers for six wine brands, including the successful Gotham label. He started with 2000 cases of Gotham and this year he'll make 140,000 cases.

He puts its success down to twin principles: creating great value for money and creating a taste consumers like. In the case of Australians, this meant bypassing traditional methods from Europe, where tannins and acid levels are naturally high.

"In Australia we don't have that naturally," he says, referring to the fruitier taste of his wines. In his view, consumers "don't want to drink dry, tannic acidic wines that need to be put in a cellar for 20 years before you can go near them".

People have called the wines "fruit bombs" because of their jammy taste and high alcohol content, but Mr Clugston is against artificially changing that.

"It gets down to this point, you're probably making Coca-Cola when you get like that. I don't believe we've actually allowed the grapes to express themselves anymore, we're now saying 'Oh, we've allowed them to express it, now we're going to take away all their expression'. It doesn't make sense to me."

Consumer preference is why he's also continually tasting the competition.

"A lot of producers become completely blinkered about what they're doing and they actually don't taste enough of other people's wines . . . so they don't know what they're competing against.

"There's going to be very few consumers that say, 'Look your wine's no good, or your wine's too dry, or it's not as good as your next door neighbour's wine'. They'll just move on to the next table."

Perhaps controversially, Mr Clugston's other strategy - value for money - means he consciously sells wine that is better than its price point. That, he says, is the way he combats the discounting power of the supermarkets and online wine clubs. He wants repeat custom.

"I have so many anecdotal stories, when I was a retailer myself, I've read a review and . . . I've gone out and bought it into the shop. And the first lot sells like that, five cases straight out the door, because other people have read the review. I'll get another five cases in, the second five cases sits there for three years and I can't sell it . . . Why did that happen? Because the review actually didn't match what was in the bottle."

For Te Kairanga, this means increased focus on quality. The winery only grows enough grapes for about 50,000 cases onsite, and has been buying in grapes from elsewhere.

Mr Clugston wants that to stop.

"Te Kairanga will be 100 per cent estate-grown Martinborough product."

With FFWNZ's Marlborough wines doing well in the US already, Mr Clugston says he will be focusing on relaunching TK in North America and introducing it to new markets. He hopes the Swedish government alone will take 30,000 cases of TK pinot over the next two years.

For an Aussie to say he thinks New Zealand white wines are better than Australia's is a big ask, but Mr Clugston will do it, with the exception of a few "unique" pockets.

Recalling fondly his first taste of Cloudy Bay in 1986, he says New Zealand sauvignon blanc has grown "to the point where it's damaging the Australian white-wine industry because consumers back home, they prefer to drink it. It's really simple".

Even within Marlborough, he thinks the minerally taste of Awatere Valley, where Vavasour resides, is better than the fruitier product of the Wairau Valley, where Goldwater is based.

Case in point: Vavasour's 2010 savvy has just picked up Decanter magazine's trophy for best New Zealand sauvignon blanc over £10 ($20), "an absolute standout".

Mr Clugston says there are no plans at present for Foley Family Wines to buy more New Zealand wineries but he won't rule it out. And to those who get nervous about wealthy foreigners rolling into town, Mr Clugston says he personally has no such qualms.

"We're going to be spending quite a bit of money on Te Kairanga, improving vineyards and infrastructure. We're probably going to employ a few extra people and it's good for locals. The alternative could well be to see vineyards disappearing and people losing jobs."

- © Fairfax NZ News