New Zealand wine woes: there’s always a price to pay for volume

An article in the New York Times, this Friday, discussed the challenges currently faced by the New Zealand wine industry, as the high-flying Kiwi sauvignon blancs get caught in the global wine market slowdown. Just as the economy was coming down hard, New Zealand got itself two bumper crops in a row, producing more wine than it ever did before.

So people are buying less, and here you are with more wine to sell. Not a great combination.

The news isn’t all bad. This year, New Zealand wine managed to take a very strong position on the Australian market, with Oyster Bay sauvignon blanc becoming the top-selling brand in Australia. It has been selling the extra volumes it harvested, and control on yields in 2009 has kept the industry from drowning completely in its extra wine.

That being said, the price of the wine being sold has dropped considerably, putting pressure on the winegrowers. NZ sauvignon blancs had been getting quite a premium, and this year it’s largely gone. Just look at the official 3-month export sales figures from September 2008 and September 2009: volumes go up almost 28%, but the total value of the wine sold goes up barely 5 percent. It will be very interesting to see what happens in 2010, when there is still a huge crop to be sold, in a wine market that doesn’t look like it will have recovered.

The question is: how does one position oneself in such a market, in order to regain market share and pricing? It’s even more important to make yourself distinctive, to offer something truly unique.

Vineyards at Gunn Estate, who make distinctive wines in Marlborough. Thats not always the case.

Vineyards at Gunn Estate, who make distinctive wines in Marlborough. That's not always the case.

Now, I haven’t exactly been contributing much to the world consumption of Kiwi “savee”, as I’ve heard some winemakers nickname it. As I mentioned in a previous post, I got fed up with the overly-similar sauvignon blancs from New Zealand a while ago. A New Zealand tasting at the first North American Wine Bloggers Conference, in Santa Rosa, failed to revive my interest in the variety. Only one of the dozen SBs I put myself through, the Gunn Estate 2008 Marlborough Sauvignon Blanc, had something distinctive, with a lovely mineraly, dry, citrusy line of aromas and flavors, and none of the grassy-grapefruity combo that is otherwise omnipresent. Earlier in 2008, I’d also tasted Barker’s Marque Three Brooms sauvignon blanc, a very classy wine with depth and backbone that also had a distinctive style. The exception, unfortunately, not the rule.

So, lots of similar wine, lots of volume, quick growth, and then a drop. Where did we hear that before?

Australia certainly comes to mind. The Wine Australia figures show that export sales and export volumes have gone down from 2007 to 2008. A situation much worse than what New Zealand is currently experiencing.

The country saw phenomenal growth, built a powerful, all-encompassing brand that brought its own downfall. The crisis that has befallen Australian wine in the last few years was the direct result of the strategy that also brought it success.

Want another one? Beaujolais.

Beaujolais Nouveau and Georges Duboeuf were a winning combination for a couple of decades, and winegrowers went all out in that direction, selling to produce a lot of wine that fit into a single model (thanks in part to a specific kind of selected yeast). All red fruit (and sometimes, unfortunately, banana), easy drinking, but glossing over all the diversity that is actually found in the vineyards of the Beaujolais region.

After record sales in the 1990s, things started going downhill in a big, big way. And when the US and British export markets also dropped, the situation became critical for winegrowers of that underestimated region. The volumes are gone, and a lot of winegrowers are suffering, just as is happening in the Southern hemisphere. There’s always a price to pay for a high-volume, high-growth strategy. At one point, what goes up will go down.

This week, Andrew Jefford gave a speech to the Australian Wine and Brandy Corporation’s Annual General meeting. Here’s what he had to say about the challenges facing Australian wine, and especially about quality vs volume and identity in wine:

The Australian definition of quality has served the country well during the boom years, since it creates bright, high-impact, consistent and easily comprehensible aromas and flavours which are perfect for those moving into wine from other areas of the comestible spectrum.

When you talk to international media and consumers, though, there are criticisms.  The first is that, although Australian wine is consistent and reliable, it’s also boring and samey.

Jefford goes on to point out that the wine market is by no means uniform, and that “Not every drinker is a beginner”. The solution supported by research, he goes on to add, is that Australia should emphasize regional character and terroir. Differentiate. Give your wines extra dimension – not extra volume. You’ll get better prices, and better customer loyalty. Because customers will have something to get attached to in the long run. Not just superficial qualities that become less and less surprising and less and less enticing as time goes by. A number of wineries of all sizes have understood that and are moving forward in that direction.

There is very probably a lesson in there for New Zealand, as the downward pressure makes itself felt on its wine. In Beaujolais and in Australia the vignerons that are weathering the crisis are those that have something specific to sell, not just volumes of generic wine. Terroir-driven winemakers of Beaujolais like Marcel Lapierre and Jean-Paul Brun are certainly doing better than the farmers who let go of their specificity for the promise of evergrowing volumes.

There is a thing called gravity. It applies to the wine market too. When you have deep roots in the land, you may not climb as high, but then again, you won’t fall as low.

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One Comment

  1. Posted December 14, 2009 at 2:40 pm | Permalink

    I think New Zealand produces wine like all other highly regarded wine regions. All great wine regions produce a range of wines for an even wider range of consumers. Both New Zealand and Australia have had one message to cover the entire spectrum of production – from bulk to boutique. In the end it only confuses and leads to the surplus of comments regarding the current state of affairs.

    Today, we are looking at the next chapter for New Zealand as the highly regard artisan & boutique producers quietly gain recognition throughout the world. For those that seek special gems from all wine regions, these are very good times.

    I wrote a little about this last week — http://blog.newzealandfoodandwinetv.com/

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