Despite rising sales, the California wine producer The Chalone Wine Group has announced a falling net income for the first half.
The company reported total case sales of 298,634 for the first six months of 2003, a 10% increase compared to the same period last year.
But net income for the first six months of 2003 was US$504,000, compared to $938,000 for the same period in 2002. Diluted earnings per share for the second quarter of 2003 were $0.04.
“The U.S. fine wine industry has been hit with a double whammy of a down economy and an oversupply of wine,” said President and CEO Tom Selfridge. “These factors have produced tremendous competition in the marketplace.”
Selfridge said: “To meet that pressure, we responded in the last half of 2002 with competitive pricing and added sales staff to reach more markets. Last August we also invested in a winery with 45 acres of vineyard on a prime site in Napa Valley’s Rutherford sub-appellation as home for Provenance Vineyards.
“All of these actions should ultimately add to our bottom line but the short-term effect is that it reduces our net income with strategic increases to Selling, General and Administrative expenses and net interest expense, primarily due to our Provenance acquisition. Our strategy has always been to focus not on just one or two quarters but to take a long-term view in building market share.”
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