Kiwis face up to challenges
Thursday 26 August
It’s good to see the New Zealand wine industry facing up to the challenges it faces rather than bury its head in the sand or, worse still, deny things aren’t smelling of roses.
So, at today’s Romeo Bragato conference in Marlborough, Stuart Smith, chair of New Zealand Winegrowers, made a balanced and wise speech.
Falling profitability, oversupply, and the strength of the NZ dollar have been the crux of the problems the industry now faces, leading to Kiwi wine companies struggling or going out of business. Winegrowers also called for another harvest of 265,000 tonnes after two record harvests of 285,000 tonnes in 2008 and 2009.
Having spent seven months in New Zealand I don’t profess to be an expert but there are things I have noticed on my way round the country’s wine regions that have surprised me. I believe there’s naivety among the smaller players of the trade. No doubt, that occurs in many other wine producing countries. Consulting for an independent wine merchant in the UK for the past seven months and looking for new wines for its portfolio, there’s a lack of awareness of what’s going on outside New Zealand. Poor branding (or lack of it), dated labels, and an unwillingness to negotiate on ex-cellar prices makes you wonder if they’ve ever been to the UK, US or Australia to look at what’s on the shelves and the competition they’re up against. Obviously, many New Zealand producers are on the ball but many smaller wineries are making wine for themselves.
Here’s some snapshots from Smith’s address, offering another insider’s insight into the industry:-
After two decades of sustained growth, we are all now experiencing the worst trading conditions since the mid-1980’s. The global recession and markets trading down combined with issues specific to our own sector have seen grape and land prices fall sharply, bulk exports lift, in-market wine prices down, the NZ dollar is high against the UK pound and the US$ … times are tough, very tough indeed.
He later added: “Falling profitability is the major issue for growers and wineries right now. It is the issue that must be addressed – but it in turn is a function of a number of different issues. Supply and demand, the value of the NZ$, tax rates, compliance costs - these are all issues affecting profitability, so we need to have a range of strategies to address these issues as far as we can.
“...So going forward we must continue to be market led, harvesting no more grapes, making no more wine than the market can profitably absorb.
In that vein, we have been asked frequently in recent weeks ‘What is the demand for New Zealand wine out of the 2011 vintage?. Our assessment at this stage based on information from our wineries and looking at market trends is that a vintage of 265,000 tonnes which is the same size as 2010, would be sufficient to meet demand for NZ branded wine in the next year.”
Another Kiwi vineyard bites the dust
Thursday 19 August
Can we really say we’re surprised that another New Zealand vineyard has gone under owing a whopping $24 million (£10.8m)?
No.
There’s been a slow trickle of grape-growing and wine producing companies that have gone into administration in the past year but I believe Awatere Vineyard Holdings’ demise could push the flood gates open.
Vineyard plantings have tripled since 2000, with grape prices falling as much as 50% following two consecutive bumper harvests, in 2007 and 2008. There have been a host of new entrants to the industry with romantic dreams of making their own wine or investors wanting to jump on the bandwagon and make a quick buck. If only they had done their research before making the plunge, they would have found that the soil wasn’t flecked with gold.
Central Otago producers Anthem Hodings and William Hill winery, and Marlborough’s Cape Campbell have already fallen victim to the oversupply and economic downturn and others will follow.
It’s a sad situation for those affected but the imbalances that have been created in the last three years need to be redressed. We’re likely to see the bigger companies getting bigger as they swallow up vineyard land; vineyards will be pulled out and replaced with other crops, and life will go on. Hopefully, the industry will have learned its lesson too.
Cheap Kiwi Pinot Noir lines Oddbins’ shelves
Monday 9 August
£6.99 for a Kiwi Pinot Noir? Surely it can’t be done? Or, at least it can’t be done if anyone’s trying to make a living?
Yet, if you head down to your local Oddbins this week, you’ll find the 2009 Stratum Pinot Noir from Sherborne Estate in Waipara down from £10.99 to less than seven English pounds.
Back in January at New Zealand conference Pinot Noir 2010, producers argued that their Pinot Noir could not be made and sold for under a crisp tenner - unless you wanted to go out of business. You might see some of the bigger Kiwi companies like Villa Maria selling their entry level Pinot Noir at a relative snip but that’s because they’ve secured a deal from their UK distributor to take a specified amount of their higher priced wines.
John Ferris, director of sales and marketing at Villa Maria Estate, said, ‘It is a very low margin for us but if you can strike a deal on selling quantities of your upper ranges in return for cheap prices there’s huge opportunities in the sub £10 category. But it’s essential to keep your cost-of-goods down”
Many other premium producers have said sub £10 Pinot Noir is not viable for most New Zealand wineries, and they should be concentrating on the on-trade and independent sector. Yet the average price for a bottle of New Zealand Pinot Noir in the UK is just under the £9-mark. Or, you can go down to Oddbins and buy a bottle for £6.99. However, things are still comparatively buoyant for New Zealand - the average price for a bottle of Chilean Pinot is around the £6-marker.
Sauvignon producer joins Specialists
Friday 6 August
Cast your minds back to the start of the year. Yes, I know it’s difficult and some of us can’t remember what happened yesterday but you may recall a premium winemaking group lauching: The Specialist Winegrowers of New Zealand.
Sauvignon Blanc accounts for 80% of the wine that leaves Kiwi ports yet the Specialists didn’t have a Savvy in their portfolio, claiming there were few producers who specialised solely in the variety.
It’s also a price-sensitive variety, as Chris Canning of The Hay Paddock, told me in an article for decanter.com ‘Sauvignon Blanc is such a cut-throat market.’
‘There was a little prejudice toward the variety. We want to decouple ourselves from the New Zealand wine brand image that is slanted toward Sauvignon Blanc,’ he said back in January.
However, the group’s tune has changed - they have just announced Marlborough’s Fairbourne Estate will be the sixth member of the Specialists, dedicated to Sauvignon Blanc.
According to the press release, Fairbourne has been on the Marlborough Sauvignon Blanc scene since the early 1990’s. Embarrassingly, I have never visited them, tried their wines and heard very little about them, so I can’t tell you whether they are any good! I will endeavour to change that.
Fairbourne joins Waiheke-based The Hay Paddock and Destiny Bay; fizz producers No.1 Family Estate; Gewurztraminer specialists Vinoptima and, Wooing Tree from Central Otago.
Wave goodbye to Montana
Thursday 24 June
This week it was announced that Montana is no more.
One of the most successful Kiwi brands in the UK has decided it’s time for the brand to fall into line with the USA, where it is known as Brancott Estate.
Apparently the Yanks confused Montana with the US state of the same name; there was also a mix up with Marlborough the wine region and Marlboro cigarettes. So, the rest of us who weren’t in a muddle have to the new name too.
In a press release issued by Montana’s owners, Pernod Ricard, its New Zealand managing director, Fabian Partigliani, claimed Brancott Estate wines would ‘provide a real link back to its Marlborough home, Brancott Vineyard.’ What a load of marketing guff. Everyone in the UK knows Montana; they’ve never heard of Brancott – it’s just going to be another Kiwi brand – and it will take a long time for them to regain their brand equity. There’s also an issue of trust – if the name is different, will the stuff in the bottle be different too?
Partigliani goes on: “Due to the nature of Montana being a much-loved Kiwi icon, in New Zealand we will have dual brand strategy with Montana Classics by Brancott Estate remaining as the Montana brand.” So, Pernod do appreciate that Montana has strong brand loyalty. Dual brand strategies – do they work by easing people in to the new name, or will it just create more confusion? Surely, if it ain’t broke, don’t fix it?
No doubt, there will be a heap of money thrown behind the rebranding and Brancott’s sponsorship of the 2011 Rugby World Cup will hit home that Montana was just a distant memory.