Pioneer winery in cash crisis

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The Wakatipu’s leading winery is withering financially and may die unless shareholders inject fresh capital.

The warning comes from Phil Griffith, chairman and largest shareholder of the pioneering Gibbston Valley Wines.
Griffith, who owns 60 per cent of the landmark winery, has sent a letter to minority shareholders ahead of next Monday’s annual meeting.

Queenstown’s first winery has been rocked by losses of $2.65 million over two years.

With vineyard and land valuations reduced because of the grape glut, it faces a “serious financial situation”, Griffith says.

The first vines were planted at Gibbston Valley Wines in 1981 – sceptics said they wouldn’t survive – but the operation has since put the Wakatipu on the world’s wine map.

More than 220 wine awards later, notably Champion Pinot Noir for its 2000 Reserve at the London International Wine Chall­enge, the winery’s vintages fetch top dollar – up to $1000 a bottle in local
restaurants.

Yet Griffith says despite redundancies, closing surplus vineyards and dumping stock, financial projections still show “continual negative cashflow”.

He reminds shareholders his family trust propped up Gibbston Valley Wines with a loan last year – which National Business Review put at $1.4m – “but this cannot continue”.

The bank’s “pressing for shareholder capital infu­sions”.

Griffith made the loan “to keep the company solvent” after shareholders rejected a call for $2.5m in new capital at 48 cents a share.

The firm’s repeating its $2.5m pitch to shareholders – at just five cents a share because its value is now “substantially” worse.

With debt repaid and operations improved, Griffith hopes for positive cashflow. If not, “further [shareholder] cash may be necessary or liquidation of the company may be the best alternative”.

Another shareholder, who won’t be named, speaks well of Griffith, praising recent initiatives.

He believes Griffith is signalling the 23 minority owners to put their money up or sell out. “Phil has been seen as the money machine, really – now he’s saying enough is enough.”

But Griffith won’t let the winery crash because it’s integral to Griffith’s separate $300m Gibbston Valley Station golf course and villas development next door, the shareholder believes.

“I think [the winery is] the cornerstone, at least in the short term.”