New Zealand wine producers call for sustainable growth
New Zealand wine has been an export success story, with the country's Sauvignon Blanc in particular proving popular in many wine markets. But, writes David Robertson, the industry now faces the risk of growing too fast, putting its premium image and niche status in jeopardy.
New Zealand's wine industry has been growing rapidly in recent years and the country's wines are now exported all over the world, but a number of winemakers are beginning to question whether this brisk development is sustainable.
With just 0.3% of global wine production New Zealand is as relatively unimportant in wine as it is important in sheep. But New Zealand's ability to produce excellent quality Sauvignon Blanc and Pinot Noir has attracted a great deal of attention within the wine community.
Boutique wineries have been able to trade on this reputation to develop lucrative export markets. As a result, wineries all over the country have been growing and new producers, eager to get in on this burgeoning market, are setting up every year.
New Zealand's 500th winery opened last year (compared with just 204 a decade ago) and every month brings new names to the register of Kiwi winemakers.
The grape harvest has also grown rapidly, with 165,000 tonnes being crushed in 2004, more than twice the 76,400 tonnes of the previous year. Even after cold temperatures and torrential downpours hammered vines in 2005, the crush was still 142,000 tonnes - the second highest ever.
Exports have hit record levels, overtaking domestic sales for the first time last year. New Zealand winemakers sold NZ$435m of product overseas in 2005 - not far off the value of the other major Kiwi export of last year, King Kong. The country's 2005 wine exports were up 44% on the previous year and 10 times higher than the NZ$41m exported a decade ago.
Sauvignon Blanc has driven much of this growth, with exports up 84% last year. SavBlanc now accounts for 71% of all Kiwi wine exports. Pinot Noir exports were also up by 62% - thanks in part to another movie, Sideways.
The New Zealand Winegrowers' Association, the industry's trade body, believes this growth will continue and is optimistically predicting that exports will reach NZ$1bn by 2010. Meanwhile, the total vineyard area is forecast to continue to grow at about 2,000 hectares a year, reaching 30,000 hectares by 2010.
Te Kairanga in the Martinborough region is typical of the rapidly growing wineries in New Zealand. In 2004, it crushed 400 tonnes of grapes, last year it crushed about 650 tonnes and this year it will look to crush 900 tonnes. About 45% of its production is exported.
Andrew Shackleton, managing director, says: "I think it is possible New Zealand will reach the NZ$1bn in exports figure given that a large percentage of that will be from Sauvignon Blanc, which has really seen demand increase hugely in the last few years."
But as production and exports rise, there is a danger that New Zealand winemakers will grow out of their niche and have to start competing head-on with the global heavyweights - wine producers who have the sort of economies of scale and marketing clout the Kiwis can't manage.
A number of New Zealand winemakers are beginning to question whether they should rein back production growth in order to maintain the country's novelty value and reputation for quality.
Roger Parkinson's Nga Waka winery is a 5,000 case a year winery, exporting about 40% of its production, mostly to the UK and US. "At certain times of year," Parkinson says, "I see the need for getting bigger and I start thinking about how to get to 10,000 cases a year. But then I think we should stay a small winery because that step up requires a massive amount of investment. The whole wine industry has been in glut for a while now but New Zealand has a niche and that is what has kept us successful. Our quality has allowed us to get the prices internationally that we need but we are never going to be able to compete with the big producers. We shouldn't get into a bun fight with the larger wine regions. We should concentrate on what we do best."
This is not just a case of 'whinemaking' by a smaller producer. New Zealand's viticulture climate is fairly marginal and if the larger companies, particularly those owned by foreign drinks conglomerates, continue to chase exports, there is a risk that they will have to dilute premium grapes with second-rate ones in order to hit production targets.
If the larger companies sacrifice quality for quantity it will hurt the entire New Zealand wine industry and the country will become just another New World producer competing for shelf space in British and American supermarkets.
Setting export targets is an understandable ambition - and a billion dollars is an extremely round number - but New Zealand's winemakers will have to restrain their greed or risk being sent back to their sheep farms.
For all the facts and figures quoted by marketing strategists, Chris Losh believes that intuition can sometimes be a more powerful weapon than a spreadsheet....
The UK market is developing in terms of sales and sophistication. Drawing on up-to-the-minute consumer research, Alex McPhee, Neville Calvert and David Matthews of management consultants, KPMG, examin...
Recently published research indicates that while consumers have taken to the clear and modern marketing techniques employed by New World producers, they still cherish the romance and mystique of wine,...
Seven French wine co-operatives have joined forces to create a brand to compete with its New World rivals....
US wine and spirits distributor New World Brands has appointed David Rudden as CEO....
UBS has begun its coverage of the Chilean wine producer Concha y Toro (VCO)....
Vincor International has reported a 46% increase in first quarter sales, compared to the same period last year, to C$165.8m, following its acquisition of Western Wines in July last year....
The Norwegian drinks distributor Arcus is to launch its own Argentine wine brand....
- Cannabis – A clear and present danger to alcohol
- Is Irish whiskey ready to recognise its potential?
- Interview - Bernstein analyst Trevor Stirling
- The European beer market - Focus
- Trump, local spirits and the IR role - The Analyst
- Diageo appoints first programmatic marketing head
- Corporate Relations Director to leave Diageo
- Bacardi names new global communications head
- Diageo strike threat postponed with fresh vote
- Diageo, Nolets unveil latest Ketel One campaign