Delegat''s Group Limited (DGL)
Managing Director''s Address - Annual Meeting of Shareholders 2012
Slide 1: Holding Slide
Welcome Ladies and Gentlemen, thank you Mr Chairman for presenting the 2012
Slide 2: Strategic Goal
The Group remains committed to its long-term goal of establishing Oyster Bay
as one of the world''s great Super-Premium wine brands. The Group''s presence
in the global wine market has continued to grow as the Oyster Bay brand
becomes increasingly established as a leader in the Super-Premium wine
category. This success has been a direct result of leveraging the competitive
advantage the Group has created through its class-leading brands,
Super-Premium product quality and focused global distribution platform.
Slide 3: Key Value Growth Markets and Key Growth Markets
As outlined previously the Group has segmented our global markets into ''Value
Growth'' and ''Growth Markets''.
The key Value Growth Markets are the United Kingdom and Ireland. In these
markets the Group is primarily focused on increasing profitability rather
than growing sales volume.
The key Growth markets are North America, Australia, New Zealand and Asia
Pacific. In these markets the Group is primarily focused on growing sales
volumes to realise the potential of the Oyster Bay and Delegat brands at
current levels of in-market price realisation or better.
Slide 4: Operating Performance
In the year in review the Group has delivered strong performance in each of
its major markets in accordance with its Value Growth and Growth Strategies.
I am pleased to report the following results:
o Overall Case Sales were down 6% to 1,850,000 cases as volume declined in
the United Kingdom and Ireland in line with the Value Growth strategy
o Average Price Realisation was maintained in an environment of continued
foreign exchange headwinds, industry supply imbalance and weak economic
o Operating EBIT was steady at $43.5 m and higher on a per case basis
o Operating NPAT was up 7% to $25.6 m
I will now comment on market performance in more detail to highlight some of
the key drivers behind the company''s profit growth;
The United Kingdom and Ireland are Value Growth Markets where the Group''s
strategy is to increase profitability. As a result of price increases
implemented prior to the commencement of the financial year, the Group''s
sales volumes declined by 24% to 622,000 cases. The sales decline was less
than forecasted due to distribution gains and the strong underlying rate of
sale of the Oyster Bay brand. In the United Kingdom, Oyster Bay is the
top-selling New Zealand wine brand by value and volume. Beyond the New
Zealand category, in the over ?6 by value category, Oyster Bay has the
top-selling Sauvignon Blanc, Pinot Noir and Merlot and number two selling
The Group successfully established an in-market sales team in Ireland during
the year. Oyster Bay is the top-selling New Zealand brand in the Irish
market, accounting for one in five bottles of New Zealand wine sold in retail
The Group continued to achieve strong growth in the key Growth Market of
North America, increasing sales volume by 18% to 534,000 cases.
In the United States, Oyster Bay continues to lead the growth of branded New
Zealand wine, through significant distribution gains and by increasing rate
of sale per point of distribution. Oyster Bay Sauvignon Blanc is the number
three selling Sauvignon Blanc nationally over $10 by value and holds the
number one position in key markets such as New York, Massachusetts and
Southern California. The Group is building momentum beyond New Zealand''s
flagship variety of Sauvignon Blanc. Indeed, Oyster Bay Chardonnay is now the
top-selling imported Chardonnay over $10 by volume with retail sales growth
of 31%. The Group has significant long-term growth opportunities to increase
distribution and sales of Chardonnay, Pinot Noir and Merlot in the United
States as consumer preferences continue to evolve towards our cool-climate
In Canada, the Group continues to grow its distribution and sales through its
dedicated in-market sales team. The Group continues to focus on successfully
building momentum beyond Sauvignon Blanc. Oyster Bay Chardonnay is now the
top selling Chardonnay over $14 in Canada. Oyster Bay Sparkling wine was
launched successfully during the year in key provinces including British
Columbia, Alberta and Ontario.
Sales in the Australia, New Zealand and Asia Pacific region were stable at
694,000 cases. This was achieved in an environment where many competitors
were selling their brands at deep discounts to clear excess inventory.
In Australia, Oyster Bay Sauvignon Blanc is the top-selling bottled wine by
value and volume. Oyster Bay Chardonnay and Merlot lead their respective over
$10 varietal categories. The Group continues to achieve strong distribution
and sales growth with the Oyster Bay Sparkling Cuve range.
In New Zealand, the Group achieved strong sales in the second year since
implementing its own in-market sales team. During the year, the Group
launched Oyster Bay Pinot Gris in New Zealand which has quickly become a
leading Super-Premium Pinot Gris where listed.
The Oyster Bay brand has significant long term growth potential in Asia. The
Group established an office in Hong Kong and a sales team in Singapore during
the year. The purpose of the office in Hong Kong is to oversee sales and lead
the development of the Group''s distribution network in the Greater China
region and in South-East Asia. The Singapore in-market sales team has been
implemented to grow sales in both Singapore and Malaysia.
Slide 5: Major Awards and Accolades
The Group''s wines continue to receive major awards and accolades from the
world''s leading wine commentators and competitions:
o Oyster Bay Marlborough Sauvignon Blanc 2011 was awarded a Gold Medal at
America''s most prestigious wine competition, the San Francisco International
Wine Competition 2012.
o Delegat Reserve Hawke''s Bay Chardonnay 2010 and Delegat Reserve Hawke''s Bay
Merlot 2010 were awarded Gold Medals at the prominent and globally respected
International Wine Challenge, London 2012.
o Oyster Bay was named one of the Top 50 World''s Most Admired Wine Brands by
Drinks International magazine of the United Kingdom
o Oyster Bay was awarded Hot Brand status for the second year in a row by
Impact magazine for its growth achievements in the United States
Slide 6: Grape Supply
The Group harvested 20,290 tonnes in 2012, 16% below forecast yields and a
decrease of 20% from the previous vintage. This decrease was in line with
that experienced by the New Zealand wine industry as a result of a cooler
growing season impacting fruit set and yields. Excellent quality outcomes
were achieved in both Hawkes Bay and Marlborough.
Slide 7: Outlook - New Zealand Wine Industry
I would now like to focus on the outlook for current year and beyond.
New Zealand wine remains an international growth story as consumer enthusiasm
continues to grow for its unique, vibrant cool climate wine styles.
Sustainable consumer trends continue to support the ongoing growth of New
Zealand wine in major international markets. Although now a developed
category in the United Kingdom and Australia, awareness of New Zealand wine
in markets such as Asia and North America is low, presenting a valuable and
significant long-term growth opportunity.
Slide 8: New Zealand Wine Industry Export Growth
In the year in review, export sales of New Zealand wine increased by 8% to a
record value of $1.18 billion and increased by 16% in volume to a record 19.9
million nine litre cases. This continues the strong growth of the last decade
and was achieved against strong headwinds in the form of global economic
uncertainty, the enduring strength of the New Zealand Dollar against its
major trading currencies, and an industry supply imbalance.
As noted earlier, the industry''s 2012 vintage was 18% lower than the previous
year at 269,000 tonnes which resulted in the correction of the industry''s
supply imbalance earlier than expected. This shift of the supply curve is
likely to reduce the volume of wine available for bulk wine exports and the
prevalence of deeply discounted New Zealand wine in international markets.
Slide 9: New Zealand Winegrowers State of the Industry Update
New Zealand Winegrowers recently published a State of the Industry Update in
which they assessed that the lower than expected 2012 vintage is likely to
result in the following industry outcomes in the year to 30 June 2013.
o Export volumes are expected to fall by 10% which would equate to 2 million
nine litre cases
o Bulk wine export volumes are expected to fall by 33%
o Packaged export volumes are expected to rise 5%
o Domestic sales of New Zealand wine are expected to fall by up to 30% which
would equate to 2.2 million nine litre cases.
Beyond the year to 30 June 2013 the Group expects that industry export growth
will resume assuming that industry participants achieve target vineyard
Despite the earlier than expected correction of the industry supply
imbalance, the industry continues to face some headwinds, in particular the
unfavourable Pound Sterling, US Dollar and Euro exchange rates. These adverse
exchange rates are reducing industry profitability.
Slide 10: Outlook - Delegat''s Group Limited
The Group remains committed to its long-term goal of establishing Oyster Bay
as one of the world''s great Super-Premium wine brands. The Group''s strategy
of identifying ''Value Growth Markets'' and ''Growth Markets'' is delivering
improved profitability and will continue to guide decision-making in 2013.
The Group is targeting increased profitability in the United Kingdom and
Ireland and volume growth in other markets.
Slide 11: Delegat''s Sales Growth
Total Group sales volumes are forecast to increase by 6% to 1,966,000 cases
in the 2013 financial year and to 2,265,000 cases by the 2015 financial year.
Slide 12 & 13: United Kingdom, Ireland and Europe - ''Value Growth Markets''
The Group is implementing price increases in the United Kingdom and Ireland
during the current year to improve profitability. The Group is pursuing On
Premise and Convenience channel growth opportunities in the United Kingdom
and Ireland whilst researching route-to-market options in selected European
markets. Sales volumes in the region are forecast to decrease by 1% to
615,000 cases in the 2013 financial year and to 597,000 cases by the 2015
Slide 14 & 15: Australia, New Zealand and Asia Pacific - ''Growth Markets''
The Group continues build its business in the Australia, New Zealand and Asia
Pacific region. Oyster Bay Sparkling Cuvee is a focus growth opportunity
throughout the region and Oyster Bay Pinot Gris offers growth in New Zealand
where it has recently been successfully introduced. The Group is carefully
evaluating route-to-market options in China, Japan and South Korea, in order
to establish strong distribution platforms for long-term growth. Sales
volumes in the region are forecast to increase by 2% to 706,000 cases in the
2013 financial year and to 772,000 cases by the 2015 financial year.
Slide 16 & 17: North America - ''Growth Markets''
The United States and Canada are key Growth Markets. The Group has
successfully established in-market sales teams and distributor networks as a
platform for long term growth. A key objective this year is to achieve
increased distribution and sales with Oyster Bay Chardonnay which represents
a significant long term growth opportunity. Profitability in both the United
States and Canada is forecast to increase over the medium term as the Group
grows sales volume in these markets. Sales volumes in the region are forecast
to be 21% higher than the previous year at 645,000 cases in 2013, growing to
896,000 cases in 2015.
Slide 18: Investing for Growth
To support growing demand in existing markets, and forecasted growth from new
markets, the Group has invested in high quality vineyards and viticultural
land. In Marlborough, we have acquired a 102 hectare fully productive
vineyard in the Wairau Valley and an additional 91 hectares of land in the
Awatere Valley. In Hawkes Bay, we have acquired several vineyards in Gimblett
Gravels increasing the Group''s total holding to 100 hectares in this famed
Slide 19 & 20: Forecast 2013
Sales for the first five months to November are in line with 2013 forecast
and ahead of last year. The Group continues to actively manage its currency
exposure; however currency movements have the potential to impact on
earnings. The New Zealand dollar has continued to remain at higher levels
than the forecast foreign exchange rates for the first five months of this
financial year. That said, the Group is on track to achieve a forecast
operating NPAT of $27 million in 2013 which is in line with consensus and 6%
higher than last year.
Slide 21: Summary
The Group delivered strong operating performance in 2012 and continues to
perform well in the current year. Delegat''s is focused on growing shareholder
value through achieving profitable long-term growth. With strong and
sustainable competitive advantages in brands, distribution, supply and
quality, the Group is well positioned to achieve its sales forecasts in the
As an international employer and vertically integrated business, Delegat''s
attracts a diversity of talent into its high-performance culture, each
sharing a common goal of establishing Oyster Bay as one of the world''s great
Super-Premium wine brands. I wish to offer a personal thanks to each of them
for their shared commitment to the vision and high-quality operational
execution of Delegat''s global strategy.
I would also like to take this opportunity to thank the Board for their
contribution to the Group''s ongoing success.
Slide 22: Delegat''s Group Limited, Annual Meeting 2012
For further information please contact:
Delegat''s Group Limited
Telephone 64 9 359 7300
End CA:00230654 For:DGL Type:MEETING Time:2012-12-04 14:00:11