JIM VEITCH

Giesens Value Fourth Man

Article published in THE PRESS, Christchurch

FRIDAY , 23 DECEMBER 2005

Canterbury wine pioneers Theo, Alex and Marcel Giesen brought in an outsider a year ago to help to run the business. David King talks to Jim Veitch about life as the fourth man at Giesen.

Family-owned businesses can be notoriously difficult beasts to enter as an outsider, but when Theo Giesen phoned Jim Veitch to ask whether he would be interested in being the first general manager at the family wine business, he said he would love to have a chat about it.

It must have been a productive chat, because a year later, Veitch looks at home in the Giesen Wines headquarters at Burnham, and he is talking about progress on the company's five-year plan.  That plan appears simple: produce as much Marlborough sauvignon blanc as possible and export it.  Riesling, pinot noir and chardonnay are also produced, but the delicate, light and fruity sauvignon blancs Marlborough produces are what the Giesens and Veitch believe the market wants.

While "ask Theo" is a fairly regular response to more reaching questions, Veitch is happy to tackle most of them.

The 55-year-old is a veteran of the retail and liquor industries.  He was part of the team that founded the Countdown supermarket chain - his wife thought of the name, he says, and they still use the original slogan: "You can count on us to keep prices down".  He has run his own grocery business and had a tenure at the former Magnum Corporation, as well as the DB Group.  He has a Dunedin Scots family background and went to university in the tartan city, where he completed a Bachelor of Commerce.  The Scots background appealed to the German brothers, he says, who guessed that he was likely to be frugal.  They had also known him through business dealings for about 20 years.  Veitch's background has been in brand building and retailing. "I have a reasonable understanding of consumer behaviour.  No-one's perfect at it, but if you have been behind the counter, you understand it or you go broke."

His job description includes liaising with Giesen's Marlborough business, work on distribution, sales and marketing, and helping with forward planning and strategy.  He also shares the travelling duties with the brothers, and is off to London.

Being admitted to the inner sanctum has not been difficult.  "I haven't found it at all hard," says Veitch.  "We don't agree on every point.  Nor do the brothers agree on every point.  That is part of their strength.  We have healthy discussions.  We reach a decision and action follows quickly.  "There's no need to go through board committees.  That's refreshing for someone who came from a corporate environment.  Here you make a decision and get on with it.  You walk out and do it.  You can be very responsive to your customers' and distributors' needs."

The Giesens' business is run leanly, with just 30 staff.  The corporate office at Burnham is a weatherboard farm cottage in the midst of the vines.  Veitch says the unique thing about the Giesen brothers is that they have all been involved in all aspects of the business, so everyone can do everything.  "We are lean and nimble," he says.  "For example, we can bottle to order.  It's a low-cost, efficient organisation."

Although the family vineyard is a landmark on the road between Rolleston and Dunsandel, the brand has a low domestic profile because the brothers have focused on exports.  The Australian market, in particular, is doing very well, he says.  Drinkers in the warmer states, such as Queensland, love sauvignon blanc.  "Half our business is to Australia.

Sauvignon blanc is taking off, as it is in other markets. "But progress with the wine variety has been slower at home.  In some ways, New Zealanders are only just catching up with what they produce best for the world."

Part of the reorganisation since Veitch arrived has been a switch to a new distributor in New Zealand, which has lifted the performance.  The Giesen labelling is also about to be refreshed, another sign of Veitch's influence.  Like the rest of the farming sector, wine producers have been under pressure from the sustained strength of the New Zealand dollar.

"There's a squeeze on margins, and some markets, such as the United States, are not as profitable as they could be," he says.  "Competition is a given (factor) - consumers always have choice - but it is hard to do anything about the dollar".  But Giesen, as a family firm, has always adopted a long-term view and hangs in there, keeping faith until the currency corrects.  Giesen pitches its wine at the premium end, but counts on it being recognised as good value for money.  That translates into about $22 for a bottle of sauvignon blanc or about 6.99 in British supermarkets.  The Giesens have to live with the currency squeeze, says Veitch. "There's no room to lift the prices, because we are already at a premium."

While the rest of the world complains about a wine glut, Marlborough has the opposite problem.  "We can sell as much as we can produce.  The only thing limiting our growth is the ability to buy land".

Building a wine label is hard work and the Giesens have been at it for 25 years.  As well as being essentially arable farmers, the brothers are winemakers and marketers.  They grow the grapes, make the wine, bottle it and then sell it through distributors.

The Giesens, with Veitch's help, want to grow from their 200,000 cases a year production to up to between 300,000 and 400,000 cases.  They are already a top-10 producer and one of the biggest independents, and this would put them farther up the ladder.

Veitch believes the hard yards done by the brothers over the years to build the brand will make this possible.  The wine industry is all about relationships and the brothers have travelled around the world on sales trips and exhibiting at wine shows, "polishing the door knobs", as Theo Giesen describes it.

Three years ago, the family made the headlines when a deal to sell out of the business to an American buyer for $45 million fell apart and they were sued by the adviser who set up the deal.  The brothers settled out of court.  Today, it is still a fairly sensitive topic with Marcel Giesen, in particular, who is still aggrieved at what he saw as one-sided coverage of the spat.  The brothers say they were looking at selling to pursue other interests, but are now focused on the wine business. "You always have ambitions and wishes", says Theo.  "We were thinking about other things".

Selling seems to have been replaced by a zest for expansion, with the company more than doubling in size since then.  The main thrust of the growth has been a big investment in the Dillon's Point vineyard in the heart of the Wairau Valley.  The 150ha vineyard has been developed from scratch, and will be close to full production for the 2006 vintage.

Alex Giesen says having Veitch on board has been like "a reality check" for the brothers.  "It's an opportunity for the company to become more multifaceted.  We can take a broader approach to things".

Theo Giesen says he would recommend bringing in an outsider to a family business. "You reach a certain size in running it as a family business, and you could run into the danger of losing your objectivity.  It gives you peace of mind, corporate discipline and focus".

The brothers haven't actually stepped back, says Marcel, but the general manager is needed because the business has doubled in three years.