LOCAL BRANDY

Evening Post, Volume CXL, Issue 54, 1 September 1945, Page 11

LOCAL BRANDY

COMMERCIAL POINTS

REPORT TO COMMISSION

Although it had no recommendation j to make on the subject, the Department of Industries and Commerce reported to the Royal Commission on Licensing yesterday on investigations it had been requested to make into the possibilities of brandy production for sale as such in New Zealand, following the evidence given in March by Mr. B. W. Lirideman,' viticultural adviser to the Department of Agriculture. •...'■■ ; The report was presented by William; Kennedy Coad, investigating officer-to j tho Department of Industries and Com-' merce. who said that'as a starting point; to con ,ideration of the economics of production, regard must be .had to the; j cost of imported' brandies. Speaking; very" broadly, it could be said that if: pre-war experience were restored the: four main grades coming into New; Zealand would be: High quality Cognac brandy at £2 to £2 10s a gallon cased;, good quality French brandy at 22s 6d a; gallon cased; bulk brandy, 3-5 years old, ranging from 7s 6d, to 15s 6d a: gallon; and Australian brandy, cased (!4s 6d a gallon in 1932 and 29s 6d in." 1945). . ■'••'. Imports for the' years 1937 to 1939 had averaged 55,500 liquid gallons, j about 41,750 of which would be bulk, at an a*verage price of 11s 6d a gallon. Such competition at 1939 levels could bu removed if Government policy were to give protection to the local industry. Of the first of two alternative schemes, a local block exclusively for brandy production, Mr: Coad said it would involve a capital cost of £800,000. Some of this would not be new expenditure, and the only "profit" allowed for was 3 per cent, on the expenditure, the rate applicable to rehabilitation loans for the employees.' "For the purpose of . assessing the probable competition of brandy from overseas, let us consider the various types which in the past entered the New.Zealand market," stated the report. "Probably 12,000 to 20,000 gallons of Cogaac a year normally enter the country. This, in one sense, appears to be above competition, in that the substantially higher price may not deter connoisseurs or invalids from purchasing that quantity. "The estimated price of the New Zealand is slightly. less than the pre-war landed cost of good French' brandy, 'but it is doubtful whether a slightly cheaper price would offset the French quality. "With the bulk imports, the price comparison is most unfavourable to' the local project. The demand from the public generally would tend to be transferred to other spirits if the substantially higher price were asked, and this changed demand, coupled with the unchanging preference of the connoisseur and invalid for imported Cognac or other good French brandy, could undermine the quantitative basis of estimates now made. Rigid import control (or an embargo) might, at a cost, provide a final answer to the demarid for quality imports, but no form of control could assure allegiance to brandy consumption. "The production cost is comparable with today's landed cost of Australian brandy. This landed cost is, however, based on scarcity conditions, and may tend to revert to pre-war levels.. Moreover, .as 98 per cent, of imports were from France, up to 1939, it is difficult to predict whether or not successful competition against Australian imports will, in fact, secure any substantial portion of the local market. "In this connection it should be notod that licences for the importation of French brandy are now being is-. sued once more. "It is suggested by the Department of Agriculture that the quality and flavour of New Zealand, brandy may in time excel that- of the Australian product, owing to better local climatic conditions and types cultivable. If. however, French brandy regains its premier place on the . New Zealand market, the factor of - New Zealand quality, as against Australian cannot be interpreted as ensuring equivalent I superiority to the French product." It had been suggested, continued the witness,: ijthat .instead pi, distilling .the. 'BrWdy at W single"'distillery; this pro* cessing might be undertaken by winegrowers who already had facilities for producing spirits for fortifying their own wine. It was problematical, however, whether production /would be cheaper under this alternative, while supervision of quality and the like? would be more difficult than. * where: there is a single distillery. • ' ':' !- r Under the other scheme, of produce tion from areas added to existing vineyards, both expenditure "on capital account and production costs would vary according to. whether the area added for production of grapes' for brandy was a high or.low ratio; to the area originally devoted to: grape growing. The production cost was estimated to be much lower than tinder the first scheme. Moreover, it was probable that the gallonage thus available would be sufficient to meet the demand for brandies of the "average" to "good" classes. "Unfortunately the scheme which appears sounder economically offers poorer prospects of employment," he continued. "In the case of scheme I the direct employment of 83 men would be immediate. Scheme II might employ only 13 to 15 extra hands in the first two or three, years. Yet as a rehabilitation measure it ..would seem wiser to build soundly and steadily rather than to run the major risk." : The Government action necessary to institute this production would be the granting of licences under the Distillation Act upon recommendation of the Department of Agriculture. Initially the brandy would be a by-product only, and further Government action could be considered provided the quality was proving acceptable. The Department concluded that the processing of brandy could be undertaken with less risk if planned as an adjunct to existing wineries, rather than as a single large unit. Moreover, the capital outlay was highly disproportionate both to the saving of sterling funds and to the employment of labour secured' by the investment. Those remarks applied whether the hypothetical block were a Government one or provately financed. On a co-operative basis, however financed, costs of production would not be lower and could conceivably be higher, particulax-ly if the vineyards were not compactly located, in which case transport costs would be greater. Again, each individual holding would need, to guarantee to the tenant a regular income from the growing of grapes, regardless of the final profit or loss, from brandy manufacture. Moreover, finance would be heeded for both living .and development for at least the initial three yearn, until the vines were fully productive. Production of brandy through existing distillation units could be undertaken as a long-term project by the better-equipped vintners if they were granted licences under the Distillation Act to produce spirits for sale. While, on. the one hand,' little additional capital, and perhaps no financial assistance, would be required, on the other, production for general sale could develop only over a period of years, and even at its maximum.the employment potential would be inconsiderable as an aid to rehabilitation. The saving in sterling would, however, be upwards of £30,000 a year.