Spirits Firms Hit Twice By Govt.

Press, Volume CVII, Issue 31399, 19 June 1967, Page 17

Spirits Firms Hit Twice By Govt.

Before any businessman complains about reductions in his import licences in the last two years he might well ponder the fate of wine and spirit merchants in this country. As well as being affected by import cuts they have also been hit by the heavy increases in duty on spirits announced in the May mini-Budget.

Because of these measures, they are likely to be hit as severely as any other business during the present recession, in spite of the phenomenal growth of New Zealand’s wine and white spirit industry.

This was brought home by the annual report of Quill Morris, which has decided to reduce its dividend in the latest year from 12| per cent to 10 per cent, in spite of a small profit rise.

The chairman, Mr F. S. Taylor, warns in his annual report that the combined effects of reduced quantities of some spirits, plus the increase in the price of all spirits, may have a detrimental effect on profits. Harsh Rise The increase in duty will sharply cut demand for spirits as the rises in price vary from around 24 to 33 per cent, harsh rises by any standard. If a consumer were faced with this price increase for any other consumer item, he would certainly consider seeking an alternative. The rapid rise of the spirit industry in New Zealand has to some extent helped out on the import cuts, and in fact the higher sales of New Zealand made products was one of the factors behind the small profit rise by Quill Morris. White spirit imports have been prohibited and a more favourable excise duty, com- | pared with the customs duty, i on imported spirits has created, a favourable climate i for the New Zealand industry, Mr Taylor points out. N.Z. Wines There has been spectacular growth in the demand for New Zealand wines, so much so that major New Zealand wines are now on strict quotas. Quill Morris’s wine sales have risen almost 100 per cent in the last five years. Nationally the sale of wine in five years has increased from 880,000 gallons a year to 1,360,000 gallons. Fortunately, Quill Morris has a shareholding in Corbans, which is one of the three main wine makers in this country. In the present period of demand exceeding supply, this shareholding will give Quill Morris access to many of the good wines. Group Liquidity If sales of wines and spirits are affected during the present year, then the saving of more than £2OOO in paying a reduced dividend will help the liquidity of the group. The cash flow was helped in the latest year by a payment of £25,000 by Ballins Industries and Fletcher Humphreys, which represented the remainder of the un-

called capital on 50,000 10s shares issued in 1965, and a premium of 5s on each share. Working capital rose £20,000 in the latest year, but bank overdraft rose £4563. This balance appears to have been distorted by the United Kingdom shipping strike which delayed supplies until the final quarter. This meant that at the end of the financial year, sundry debtors were up £17,313, and stocks were £17,162 higher at £67,478. Strong Position To add to this demand on funds was the capital outlay for the new drive-in order department in Dundas street. Presumably there will be no major capital expenditure in the present year and the ratio of 2.5:1 for current assets to current liabilities places Quill Morris in a strong liquid position, should this year prove difficult. One of the pleasing aspects of Quill Morris’s accounts this year was the form of presentation. Shareholders received a much less bulky report, which featured the new drivein department on the front and back covers. The director’s report, balance-sheet and profit and loss account and chairman’s address were well set out so that shareholders could follow the points outlined with the minimum of concentration. Tui And Stout In the next 12 months New Zealand could become the battleground for a “stout war” between a small local brewery and a giant British firm.

The Tui Brewery has been producing and has been generally responsible for the marketing of Guinness stout. As previously announced, this arrangement will not be renewed, and from about the end of the year the New Zealand Breweries group will take over from Tui Brewery. Sales of stout brewed and sold under the Tui label outstrip those of the Guinness brand, and this would seem to be the main reason for the change. New Zealand Breweries has of course many more outlets, and is more favourably situated to distribute economically. In spite of the success of

its stout, Tui will lose considerable gallonage, but' the advance warning has given the firm time to improve its marketing and to look into new products. Even so, because of its small size any major moves in the industry have always had disproportionate effects on Tui, and its best efforts will be needed to make up for this one.