Wine News & Features
Click on the links below to view items from
your selection
By Carolyn Evans-Hammond, published in Wine & Spirit International, January 2004
Sauvignon Blanc accounts for just over a third of New Zealand wine production but for well over half of exports to the UK, creating an expensive imbalance. The industry needs to persuade the UK to look beyond this variety if it is going to grow. And growth has never been more critical with production volumes mushrooming.
This situation could force prices to drop despite high production costs and a strong New Zealand dollar. Or worse: New Zealand could move from a situation where many producers could not churn out enough wine to one where the less established players can not sell it.
As far as the major supermarkets are concerned, greater volumes are a good thing.
“As more plantings come on stream, I see bigger promotions in the UK to drive volumes and I think we’ll see a softening of price points due to supply and demand,” says Julian Dyer, New Zealand wine buyer with Sainsbury’s Supermarkets Ltd. “There’s still room for Sauvignon Blanc because it is selling so well in the UK; it’s like dynamite.”
However most buyers recognise New Zealand’s marginal climate undermines consistent volumes year to year, particularly if this market relies heavily on just one variety.
John Hancock, owner of Trinity Hill Winery, calls the task of broadening interest beyond Sauvignon Blanc “bloody difficult” but distributors and buyers are making all the right noises.
“New Zealand Pinot Noir is definitely up and coming,” says Matt Pym, New Zealand wine buyer with Majestic Wine. “We get quite a demand for it but there has never been sufficient availability. With new plantings and a possible bumper crop, there may be enough now.”
Dyer agrees Pinot Noir may be the next big thing for New Zealand.
Pym takes the view New Zealand Pinot Noir has secured a niche—with California having a slightly higher price point, Chile a lower price point, and New Zealand pretty much owning the £8 to £12 ($14.66-22) level. He says he may take on several smaller producers as a UK exclusive, suggesting there may be a chance for less established players.
Some producers are already seeing breakthroughs.
“We’ve struggled up to a year ago to get people to see we’re serious about Pinot Noir but in the last year it has gone ballistic,” says Warren Adamson, European wine manager with Villa Maria. “We’re in a position where retailers see the potential of Pinot Noir.”
Burgeoning demand for Pinot Noir could prove favourable for New Zealand by creating a halo effect around the country’s wine industry beyond Sauvignon Blanc despite the fact this black grape accounts for just 13 per cent of total yields by volume, while quality Pinot Noir is notoriously expensive to grow, and hence sell. The question is whether it offers significant profit potential.
Profit is particularly critical as exchange rates, production costs and rising volumes pressure producers.
Since 2002, the New Zealand dollar strengthened by 23% against the British pound moving from a value of 30p to 37p. For producers who sell in New Zealand dollars, currency fluctuations are manageable.
“We sell in New Zealand dollars and take the good with the bad,” says Hancock. “Our importers work on a mid-range exchange rate. If things get too far out of whack either way, we will look at making slight adjustments.”
However, many other sell in sterling and face a tight squeeze—especially with high grape costs. From 2001 to 2003, average grape prices rose 25% in New Zealand. They’re reportedly softening slightly this year but with more than half of grapes grown by growers instead of wineries, they are a major fixed cost for the industry.
To top these challenges, a record crop is expected due to normal crop levels from good weather and an increase of producing vineyard area. Annual volumes are expected to continue to rise as land under vine increases by about 15% by 2006.
Although more volumes will almost certainly create a rise in revenue for the industry as a whole, greater supply relative to steady demand in the UK may depress prices. UK is by far New Zealand’s most important market accounting for more than 40% of total exports by volume and value. Economies of scale for larger producers will help them keep their head above water but smaller producers will find it tougher to compete.
Market forces will rock New Zealand’s performance in the UK over the next six to 12 months and the results will be visible on shelves and wine lists nationwide.
Growth of the
|
PRODUCTION VOLUMES (IN TONNES)* |
||||
|
|
2001 |
2002 |
2003 |
2004 |
|
Sauvignon Blanc |
20,826 |
36,742 |
28,266 |
n/a |
|
Chardonnay |
17,067 |
33,883 |
15,534 |
n/a |
|
Pinot Noir |
8,015 |
10,402 |
9,402 |
n/a |
|
Merlot |
2,573 |
6,502 |
4,957 |
n/a |
|
Muller Thurgau |
4,231 |
4,806 |
1,685 |
n/a |
|
Riesling |
4,377 |
5,038 |
3,376 |
n/a |
|
Cabernet Sauvignon |
2,782 |
4,375 |
3,201 |
n/a |
|
Other varieties |
9,115 |
14,938 |
8,400 |
n/a |
|
Total |
68,986 |
116,686 |
74,821 |
150,000-170,000** |
*Source: New Zealand Winegrowers Annual Vintage Survey Results
**Estimated by the New Zealand Winegrowers in February 2004 |
|
|||
|
|
June Yr. End 2001 |
June Yr. End 2002 |
June Yr. End 2003 |
|
Sauvignon Blanc |
4,411,797 |
5,625,066 |
7,214,702 |
|
Chardonnay |
1,753,224 |
1,723,591 |
1,323,401 |
|
Sparkling |
780,906 |
1,127,148 |
11,906 |
|
Generic White |
1,390,229 |
1,084,503 |
1,200,493 |
|
Cabernet or Merlot Blend |
616,160 |
593,379 |
462,392 |
|
Chardonnay Blend |
280,629 |
437,189 |
310,591 |
|
Pinot Noir |
203,842 |
304,972 |
393,609 |
|
Riesling |
263,971 |
271,506 |
278,317 |
|
Other varieties |
784,459 |
786,725 |
1,671,409 |
|
Total |
10,485,217 |
11,954,079 |
12,866,820 |
*** Source: Wine Export Certification Service