Growers need to?halt grape avalanche

07 January, 2011

Little did the late English comedian Tommy Trinder know how over-quoted his words would become when he described US soldiers in World War II as “overpaid, overfed, oversexed and over here”.

In a similar sense, New Zealand wine in the UK has, for a long time, been over-hyped, overpriced and over here. Much of the wine has been worthy of its high price tags, but deep discounting and bulk wine sales in the past two years have led to the current “Savalanche”, creating a challenge for Kiwi winemakers.

After three decades of assured high-priced per-litre wine sales in the UK, the country’s winemakers now have to work harder to sell wine in this, their biggest export market.

Deputy chair of New Zealand Wine­growers Kate Radburnd says there is one big issue facing its wineries – and three main solutions.

“Our supply imbalance is the single biggest issue we face at present,” says Radburnd, who is also general manager of CJ Pask Wines in Hawkes Bay. “If we are responsible as an industry, we can collectively address this imbalance swiftly, which will take commitment and mutual trust between growers and wineries. But we should not expect a ‘quick fix’.

“We have experienced exponential, unplanned growth, which has created this imbalance and we now need to match production with market demand. This needs to be a multi-pronged attack,” she says.

As to how that “attack” should occur, Radburnd suggests balancing grape intake with market requirements.

John Hancock, president and founder of Trinity Hill Winery in Hawkes Bay, agrees that balance is key.

“It’s very simple in theory but it’s not easy to achieve because it requires short-term pain to get production and balance of sales back into alignment. If that requires removing vines and people getting out of the industry, then so be it,” he says.

“I’m not sure we have a major overproduction problem, but we do have an under-marketing problem – and a timing issue, in terms of the current oversupply we’re facing,” Hancock adds.

He continues: “There are too many investors who became involved in vineyard development because there were tax losses to be utilised. We are seeing this particularly in terms of Sauvignon Blanc and Marlborough where people who had no long-term desire or belief in the industry entered to make money in the very short term.

“Public companies are better off investing in widgets than wine because you can’t change wines or vineyards quickly if the market demands something different in five minutes’ time. People who aren’t in it for long-term reasons shouldn’t be in the industry,” he says.

While the biggest fall-out from New Zealand’s current oversupply has hit Marlborough wineries, there has been a negative spin-off in other regions, too.

“The excess of cheap Marlborough Sauvignon Blanc stops people from buying a Hawkes Bay Chardonnay – that’s the indirect result of the current oversupply,” Hancock suggests.

One answer would be price regulation, dictated by the New Zealand government. Another could be the licensed planting of new vineyards.

“These are great ideas but they’re not going to happen. No government will do that these days. I think the real answer is just to be patient. The world is more than big enough for New Zealand Sauvignon Blanc, particularly considering we still make less than one per cent of all the wine in the world,” Hancock says.

In the lead-up to the 2011 harvest, Hawkes Bay has experienced a frost-free spring, which means that if growers don’t intervene there will be a relatively sizeable crop.

“Of course it’s a long time between now and fruit set, but I think we should be aiming for a crop no bigger than last year’s. That is going to require discipline from both the growers and the wine companies which own vineyards,” Hancock says.

Ironically, given the current oversupply and tough market over the past two years, Trinity Hill Winery is actually short of grapes.

“We are very much in a consolidation phase,” says Hancock. “We will make enough for our markets and grow only when and where we are sure it’s for a specific audience but, yes, we could do with some more grapes. Obviously, we’ve tapped into market demand.”?The latest advice from New Zealand Winegrowers concurs with this. Winemakers are being advised to see the path ahead in terms of two phases. The first concerns rebalancing and recovering from the current situation. This should be complete by 2012 and 2013, according to New Zealand Winegrowers chief executive Philip Gregan. He told wine writers in November 2010 that his advice to all winemakers was to “meet market demand, don’t exceed it”.

The second phase involves value growth, which relies on the success of phase one.

Hancock says: “Despite the low cost and oversupply of New Zealand wine overseas right now, the UK and Australian markets are still growing for our wines.

“So, even though it may be seen to be a lot of eggs in the one basket – Marlborough Sauvignon Blanc – there is probably still room to move, in terms of growth. It just needs to be done carefully,” Hancock says, citing the proliferation of cheap French reds as “what not to do”.

Joelle Thomson is the wine writer for the Dominion Post newspaper and editor of Drinksbiz magazine in New Zealand?

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