The way forward for New Zealand wine

The New Zealand wine industry is “standing on one – albeit strong – leg” and needs to look to diversify to ensure continuing future growth, according to a global industry specialist.

Speaking on a recent visit to New Zealand, Rabobank International’s Global Industry Specialist in Wines and Spirits Arend Heijbroek said that while Marlborough Sauvignon Blanc is New Zealand wine’s greatest selling point, the wider NZ wine industry would benefit from the creation of a “second leg” to allow for future growth.

“There is still unfulfilled demand for Marlborough Sauvignon Blanc. And while that is good for Marlborough producers, for other regions it is much more complicated to bring the message across and sell their wines at the required prices,” Mr Heijbroek said.

Leading wine companies around the world need to have a Marlborough “Savvie” on their books to be able to offer a complete range of attractive wines to their customers, he added.

“The United States was keen on importing the unique style of fresh and aromatic Marlborough Sauvignon Blanc, because it didn’t compete against its own wines. However, they will be more defensive against importing other New World high quality wines which are similar to their own style,” he said.

New Zealand Winegrowers are projecting export sales of $1 billion by 2010 – up from $700 million today – and working towards $2 billion in exports by 2015. Since 2000, 75 percent of New Zealand’s production growth has come from Marlborough. Mr Heijbroek believes this region can increase its production from a current estimated 12,800 ha to 18,000 to 20.000 ha by 2010, before reaching the boundaries of its growth opportunities.

“However, as Marlborough reaches these boundaries it will be up to other regions to pick up the expansion, to fulfil NZWGs predictions. But can other regions create the same status as Marlborough? To do so, they will have to increase not only in production, but also status,” Mr Heijbroek said.

One variety Mr Heijbroek thinks the country should be concentrating on for the future is Pinot Noir.

“A wine writer in Europe recently commented that Pinot Noir will be the second variety in New Zealand, because New Zealand can make a high quality Pinot Noir, year in, year out. Whereas in Burgundy, the region where Pinot Noir has its strongest base, a high quality wine can only be produced once every three or four years. You need to capitalise on that as a country,” he said.

Mr Heijbroek said that Pinot Noir does not necessarily have to come from Marlborough, so this should allow other regions to step up, provided the terroir can do the same for Pinot as Marlborough has done for Sauvignon Blanc.

Meanwhile, Mr Heijbroek says prices being paid for New Zealand wines are still outstanding.

For the US, the average export price is NZ$9.52 per litre, with sales of 20 million litres in the past year. On the other side of the Atlantic, the UK has imported 36 per cent more New Zealand wine in the past year.

“What is even more important is that New Zealand’s leading brands are in the top 30 in the UK and are growing faster than average, despite of the relative high prices,” he said.

Montana is ranked as number 13 among the leading brands, while Oyster Bay is ranked 17 and Villa Maria is 30. All three companies’ price point is higher than any of the top 10 leading brands, with an average off trade price of £5.92.

New Zealand is viewed as one of the wine world’s great success stories, according to Mr Heijbroek, having tripled production in the last 10 years. That expansion appears to be accelerating, at higher export price points than any other new world producer.

“All New World producers increased exports, with Australia by far the most successful. New Zealand is a small player, with by far the highest export prices. The price premium is US$2.83 / litre above the average Australian export price.”

The only country in the world with a higher price point is France, Mr Heijbroek commented, attributing this partly to the prices paid for Champagne. Champagne is a region that Mr Heijbroek suggested Marlborough could look to now that it is reaching the physical limitations of expansion.

Both regions have limitations in terms of expansion, and they both produce a unique product, for which consumers are prepared to pay a considerable premium over competing products.

“In Champagne, the wineries and growers established a system with the emphasis on quality, which is then rewarded. Marlborough should be doing that as well,” he said, adding that creating a unique product that is highly sought after can help producers raise grape prices paid to the growers.

”It takes time to create an iconic wine, but once you have done that, you can charge high prices, ” Mr Heijbroek said, cautioning that high prices are inextricably linked to a high quality product, something he suggested the New Zealand wine industry as a whole should focus on going forward.