The company is majority-owned by rich American businessman William Foley, who is also a majority owner of Auckland FC and English Premier League side AFC Bournemouth. The sports-mad businessman is a financial backer of US President Donald Trump.
Foley Wines told overseas investment officials its Cromwell wine operation had been rocked by adverse market conditions beyond its control.
Developments at Mt Difficulty winery in Central Otago have been delayed.
These included a downturn in the international wine market, fallout from the Covid-19 pandemic, the cost-of-living crisis and a recession.
“The consent holder submits that the original plans for the Mt Difficulty developments are no longer economically viable due to wider market factors,” the documents state.
The company said international tourism, a “key segment” of Mt Difficulty’s target market, was down 20% from pre-Covid levels.
Domestic tourism was also down because of cost-of-living pressures.
The company highlighted increased local competition from cellar door and restaurant businesses around Queenstown, citing Ayrburn by Winton as an example.
“As a result, Mt Difficulty is now less attractive to the already reduced numbers in the region for dinner services,” the documents state.
“Subsequently, operating a dinner service is not believed to be commercially viable.”
There has been increased local competition from cellar door and restaurant businesses around Queenstown. Photo / Getty Images
The situation was compounded by high operating costs and regional labour shortages, the company said.
“As a result, it is only commercially viable for the consent holder to operate lunch services five days a week.”
Regarding Mt Difficulty’s export targets, Foley Wines requested a reduction from $4 million to $3.5m for the year ending September 2023, and $5m to $3m for the year ending September 2025.
The company had not met its export conditions because of a global downturn in wine markets and “circumstances outside of the consent holder’s control”.
Tariffs introduced by US President Donald Trump were likely to have a “further supressing effect” on New Zealand wine exports, Foley Wines argued. Photo / AFP
Foley Wines also believed 10% tariffs imposed by the United States would have a “further suppressing effect” on New Zealand wine exports.
“This is likely to impact the consent holder, whose North American sales account for approximately 35% of the rest of their exports.”
However, Foley Wines pointed to significant investment in other parts of its business, which it believed should be considered as part of the application.
This included a $13.8m redevelopment of its Run Holder facility at Martinborough vineyard Te Kairanga – more than $8m above the required investment under its OIO consent.
This investment resulted in increased overall exports and job creation.
William Foley is the majority owner of Foley Wines and Auckland FC. Photo / Andrew Cornaga / www.photosport.nz
The company said its association with the “prestige” Mt Difficulty brand had allowed it to market its full suite of wines as high-end products.
“The consent holder submits that current export numbers of Foley Wines would not have been achieved if the consent holder did not have the prestige brand of Mt Difficulty, or if the Run Holder was not developed to increase capacity.”
After assessing the application, LINZ approved the variations in July last year.
LINZ said it accepted that market conditions outside the company’s control had “decreased feasibility of a cellar door and restaurant development at Mt Difficulty”.
Revising the export requirement to $3.5m was considered reasonable given the company’s performance in the rest of the New Zealand market.
The changes requested did not affect the criteria under which consent was granted – demonstrating a “substantial and identifiable benefit” to New Zealand.
LINZ also noted the company’s total combined capital expenditure “significantly exceeded the investment required”.
Foley Wines has until June 2028 to obtain all necessary consents for construction and operation of the Mt Difficulty vineyard redevelopment.
Failure to meet the new conditions could lead to the company having to dispose of the land.
Foley Wines CEO Mike Higgins told the Herald the company was committed to the Mt Difficulty redevelopment and would complete it within the 2028 timeline.
He said wine tourism in the Queenstown region was already picking up and the winery planned to begin dinner services this summer.
Exports were down last year but were more positive this year, with strong sales into the Asia, British and US markets, he said.
Lane Nichols is Auckland Desk Editor and a senior journalist for the New Zealand Herald with more than 20 years’ experience in the industry.
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