Wednesday, 10 April 2019 08:22

MyFarm investigates viticulture sector

Written by  Tessa Nicholson

The past six years has seen increased growth in the New Zealand viticultural sector, according to MyFarm Investments, but future long-term growth will depend on other varietals outside Marlborough Sauvignon Blanc.

The Viticulture Sector Update highlights the exponential growth of Marlborough Sauvignon Blanc since the early 2000s.

“Indeed, the total Sauvignon Blanc growing area has expanded five-fold over the past 15 years (compound growth of 11% y/y),” the report states. “Coupled with an upward trend in yields this has seen total production expand more than 10-fold to around 300,000 tonnes mark over the same period (compound growth of 17% y/y). In contrast the supply of other varietals has only grown three-fold to around 120,00 tonnes during this period (compound growth of 6% y/y).

In determining if New Zealand will have enough wine to satisfy demand, the report states that the majority of greenfield development since 2012 has been undertaken by larger vertically integrated wineries. Marlborough Sauvignon Blanc has led that charge, with the companies using the variety to support other sales activity

“The sector’s consolidation and expansion by larger wine companies now sees 17 companies account for 68 percent of total exports.”

But land in Marlborough is fast running out, with an estimated 5 to 6,000 hectares of viable vineyard land still available. There is some thought that what is left will be all planted by 2025.

MyFarm Investments says for the sector to continue to grow beyond this period, it will need to find a more profitable blueprint for other varietals in other parts of the country.

“Marlborough Sauvignon Blanc has fueled the lion’s share of the sector’s growth so far, but there seems little reason why Pinot Noir from Central Otago, or any other varietal from another region couldn’t experience the same kind of international success/growth. But it isn’t solely about market success either as the returns for growers (i.e. yields and other agronomic factors) need to be attractive enough to encourage investment too.”

There are challenges ahead the report states. They include; labour availability and the impact of minimum and general wage increases, general weather risks and the associated disease and pest risks that accompany this, biosecurity breaches leading to the introduction of a new pest or disease, access to water – especially in Marlborough - and the erosion of “Brand Marlborough.”

It has been an on-going concern to many in Marlborough about the increase in exports of bulk wine, which could in turn erode the region’s brand equity.

However, the report says a number of multi-national wineries are currently exporting in bulk to achieve better logistical packaging and tax efficiencies.

“The repackaging of bulk products offshore doesn’t necessarily mean lower returns, as long as it ends up in premium packaged wine segments,” it says. “The fear for the New Zealand industry has been the risk that spikes in bulk export volumes could drive increased supply into lower-value private brands in key export markets.

“This doesn’t appear to be happening in a systemic way at present. This is best highlighted by New Zealand’s largest bulk wine destination, the UK (40% of all bulk exports in 2018). Bulk wine exports accounted for 53 percent of total volumes sent to the UK in 2018, yet the amount that finds its way into a ‘private brand’ is reportedly only around five percent. This is the lowest percentage in this category of all major wine suppliers to the UK market.

“Further, private branded sales of New Zealand wine have been growing in recent years and remain at retail price points materially above other competitors.” 

 

More like this

Cherry picking the right investment

New Zealand's horticultural sector must compete on quality, taste and branding because it will never compete globally on volume and price, says MyFarm national sales manager Grant Payton.

Hort boosts farm syndicate’s result

An aggregate 10% cash return during 2018-19 is shown in the first full year financial results of MyFarm’s horticultural and commercial rural property syndicates.

Simply put

Some of the best quotes to emerge from Sauvignon 2019.

Remove the arrogance from wine

Master of Wine Tim Hanni didn’t hold back during his session on food and wine pairing. Instead he let rip with a range of statements that had many attending nodding in agreement.

What song is Sauvignon Blanc?

Just what song epitomizes Sauvignon Blanc to you and why? That was the question Melanie Brown put to a number of writers and commentators both here in New Zealand and around the world, prior to Savuignon 19.

» Latest Print Issues Online

 

Popular Reads