E&T faces grower stand-off

A group of former Evans & Tate grape growers have established a co-operative to negotiate the sale of their fruit to other industry players, after receivers for the Margaret River winery revised its 2008 vintage contracts.

WA Business News understands E&T’s receivers are keen to lock in supplies from some of the growers in the co-op, but at cheaper rates than previous vintages.

The co-op includes former E&T executive chairman Franklin Tate and is being managed by Australian Wine Holdings Ltd managing director Mike Calneggia, a former E&T director.

Mr Calneggia said the co-op represented about a dozen growers supplying E&T with about 35 per cent of its annual grape intake. He said only a handful of growers had been offered new contracts.

Mr Calneggia said those growers had not signed the new deals because the terms were “uncommercial”.

WA Business News understands another group of growers, who are owed about $5 million from E&T and supply another 35 per cent of the E&T’s fruit, are yet to sign contracts to supply fruit to E&T for 2008 and have also received interest from other wineries for their fruit.

However, it is understood they are willing to negotiate with E&T in an attempt to recoup their debts.

The stand-off with growers has raised uncertainty about whether E&T’s receivers, McGrathNicol, will be able to secure enough fruit for the 2008 vintage.

Mr Calneggia said McGrathNicol would effectively be selling a car without an engine.

McGrathNicol partner Shaun Fraser confirmed E&T was yet to secure grape supply contracts for 2008. However, he said he was confident the winery would secure its grape requirements, which have been halved.

Mr Fraser said he had been in “positive negotiations” with most of the growers with which it was seeking to secure 2008 supplies.

“We are making good progress,” Mr Fraser said.

Mr Fraser said E&T’s “uncommercial lease arrange-ments” had been terminated.

WA Business News understands Mr Tate’s leases are among those to be cancelled.

Mr Fraser said E&T’s grape intake had been far too large during 2007 and it would only purchase about half of its previous intake in 2008.

According to WA Business News 2007 Book of Lists, E&T crushes about 43,000 tonnes of fruit a year nationally.

It is a particularly good vintage for growers to be negotiating contracts following tough times two years ago when a massive oversupply of fruit depressed prices.

Drought in east-coast wine growing regions has significantly reduced supplies and forced many wine players, including Foster’s Group Ltd, to shop for fruit in WA.

According to growers, demand for WA fruit for 2008 remains strong, with many wineries forced to lock in grape contracts more than six weeks ahead of schedule.

Mr Calneggia said he was in discussions with two large winery operators about selling the co-op’s fruit, which is predominately used for E&T’s flagship brand, Margaret River Classic.

It is understood the negotiations include a long-term contract for the fruit.

Mr Fraser is in the midst of compiling a short list of potential bidders for E&T after expressions of interest for the business closed earlier this month.

He said he had been pleased with the level of interest shown by potential bidders for E&T.

A short list of bidders will be invited to conduct due diligence, with formal bids for the winery expected in October.