Monday, 06 February 2023 15:25

Thinking Longer Term

Written by  Philip Gregan
Philip Gregan Philip Gregan

For many growers and wineries, the past three years have all been about getting through the immediate challenges associated with the Covid-19 pandemic.

Those challenges were not made any easier by the additional complication of supply shortages for many businesses, and the steep rise in inflation during the past 12 months. But at the beginning of the New Year, it is timely to think more long term - where are we going and how are we going to get there?

For the past 30 years or so, growers and wineries have built the New Zealand wine industry into a global success story. Exports, virtually nil in 1990, are now worth well in excess of $2 billion per annum. Domestically we sell about $400-$500 million of New Zealand wine each year. There are more than 40,000 hectares of producing grapes, and we employ more than 7,000 full time staff and support the employment of thousands more in service sectors and the distribution and retail trade.

That success reflects the reputation producers have built for our wines. Our reputation for quality, and for distinctive, premium and sustainable wines, resonates with consumers and is the foundation on which our sales success is built. In turn that reputation underpins the economic and social contribution our growers and wineries make to Aotearoa New Zealand as a whole, and our individual regions and communities. That contribution is the reason our sector is valued by those communities.

Looking forward, our growers and wineries need to continue to build on the basics that have got us to where we are today. That means continuing to invest in the production of premium, sustainable wines that reflect and represent that distinctive environment in which they are produced. And to resonate with our consumers, how producers do that will be important.

Recently, we launched a new brand essence for New Zealand wine which, in its own way, is a good guide to the ‘how’. The pillars of that brand essence – Purity, Innovation and Care – will be important touchstones that we know resonate with consumers now, and will do so into the future.

Consumers, and regulators, are going to demand increasing levels of detail about industry production practices. This has been a long-term trend, and it shows no signs of easing; on the contrary, demands are increasing. Recent moves towards fuller ingredient and energy labelling on wines are indicative of this.

Our industry’s ability to grow the domestic market will be limited by the small size of the market (just 5 plus million people in total) and intense competition for the consumers’ dollar. While this market may be small, it is still very important – in fact, more than 300 wineries sell only in the domestic market. While the overall market may be constrained, there are growth opportunities, whether it be the return of high value overseas tourists, the revitalisation of the on-premise trade or the growth of the zero/low alcohol market.

It is clear from discussions with wineries that potential regulatory risks domestically (whether in the form of restrictions on sale of wine, excise, or increasingly stringent production requirements), are a real concern. To counter this, we need to ensure that our sector retains its social licence to operate. In other words – we need to look after our reputation to ensure our producers are valued by their local communities as an asset worth keeping and protecting.

Offshore there are undoubtedly significant opportunities. These opportunities won’t be for everyone as some producers will continue to focus on the local market, but they will be the major driver of growth and change in the industry, just as they have been in recent years.

Strong international demand has driven expansion in the vineyard area for the past three decades. Since 2015 the vineyard area has expanded at just under 1,000ha per year and is now 42,000ha. It seems it won’t be long before the vineyard area reaches 50,000ha and only time will tell how much further it will grow beyond that.

Export growth has been steady over a long period (despite the occasional ups and downs). In 1999 exports were $125m and they reached $1b in 2009. The $2b mark was reached a decade later in December 2020, and for June year end 2023, MPI is projecting $2.4b. With continuing demand, and expansion of the vineyard area, it seems that $3b of export is now on the horizon.

It is easy to think about the future based on evolution of current trends, as I have done here. More challenging is to think about the game changing events that are revolutionary. Half a century ago, the first grapevines in the modern Marlborough wine industry were planted. This revolutionary act fundamentally altered the trajectory of our sector. I wonder if, in another 50 years, growers and wineries will look back to 2023 and be able to identify a similarly game-changing event.

Best wishes for vintage and a successful 2023.

More like this

Welcome to 2024!

OPINION: The New Year is now well underway and appears to have started promisingly on the weather front, with lots of warm, dry days.

Export Update

Several factors are playing into a slowdown in New Zealand wine exports, including bumper sales in 2020, a light vintage in 2021, and pipeline refilling in 2022.

Cellar Doors

NZW has welcomed the success of The Sale and Supply of Alcohol (Cellar Door Tasting) Amendment Bill, proposed by Stuart Smith MP, which passed its first reading with broad support from across Parliament.

Concerns over Bill

The new Sale and Supply of Alcohol Act (Community Participation) Amendment Bill may have unintended and serious consequences for New Zealand wine tourism, with licensing authorities able to decline to renew a licence where it is inconsistent with conditions on location or licence density in a relevant Local Alcohol Policy (LAP).

» Latest Print Issues Online


Editorial: Plenty of tears

Editorial: Plenty of tears

OPINION: Rachael Cook is the smiling grape grower on this month’s cover, tending vines on the miniscule, beautiful and dream-driven vineyard…

Popular Reads

Ten years of Méthode Marlborough

New Zealand wine enthusiasts have a deepening understanding and growing appreciation of sparkling wine, says Mel Skinner, Chair of Méthode Marlborough…

Sustainability Success

Taking two sustainability awards at two events on a single evening felt like "true recognition" of the work Lawson's Dry…