boom, bust or both?

Posted by Robin Ransom on 1 June 2011 | 0 Comments

Mahurangi Matters (1 June) reported that some local grape growers were removing some of their vines. This raises questions about whether this indicates a malaise either in the Matakana wine region or in the NZ wine industry as a whole, or what?

The recent global economic downturn and the burgeoning growth in wine production throughout the world in recent decades, particularly in this country, have combined to put considerable financial strain on New Zealand’s winegrowers. Competition from cheap imported wine and from cheap New Zealand wine produced by more recently established growers who did not have the foresight to consider how they would sell their product, has put strong downward pressure on wine prices. This has been exacerbated by the supermarkets taking advantage of this situation at the growers’ expense.

Great for consumers, but not good for the long-term sustainability of a quality-focused NZ wine industry. Which is at least part of the reason why some smaller high quality producers are removing vines - it is simply too hard to compete. The response from some others has been more unusual. Practices such as sending wine to the UK and Australia in 24,000 litre bladders inside shipping containers (big bag-in-the-box!), and pumping sauvignon blanc full of carbon dioxide and calling it sparkling wine, have a hint of desperation about them, and do absolutely nothing to maintain either the export price of New Zealand wine or its quality image.

The New Zealand oversupply can be summarized in three words – Marlborough sauvignon blanc. In the 2009 vintage 57% of the total tonnage of grapes picked in New Zealand was Marlborough sauvignon blanc. Ross Spence, former chairman of NZ Winegrowers and founder of Matua Valley, the first company to plant sauvignon blanc in NZ, describes the situation aptly: “…NZ’s wine production rose 54% from 2006 to 2009 while other countries – France, Spain, Italy, Argentina, the US and Australia – all declined during that time. We were still throwing 2000 hectares a year into the ground in Marlborough while the signs were all there to suggest it would be wise to curtail the rapid growth trajectory we were on” (New Zealand Wine Grower, June/July 2011).

Ironically the availability of some other grape varieties is insufficient to meet growing demand. This is our own experience as we develop an export market into China for good quality cabernet/merlot blend reds. Our own production is not large enough and availability of these wines from other sources is limited.

There will always be a sound future for winegrowers with a quality product and secure markets, but right now, elements of the New Zealand wine industry are repeating the experience of some other boom-to-bust rural industries which our country has historically been prone to.

The New Zealand wine industry will come out of this phase but I suspect there will be more pain felt yet. Meantime, the volume of New Zealand wine being exported continues on the growth trajectory it has been on for many years, but because an increasing proportion of this is bulk wine there will inevitably be a cost to the quality image which New Zealand wine has enjoyed.

Robin Ransom

(published in Mahurangi Matters, June 2011)