From Fine Wine Industry to Wine Industry and Back Again?

Since the mid 1980s when the New Zealand wine industry simultaneously started to rebuild itself from over-production with the help of a Government-funded vinepull, and from when its sauvignon blanc was first “discovered” and set on the path to cult status, the industry ethos has been one of quality first and foremost.  It has been a recurring mantra of the industry that New Zealand could not produce wine on a scale to compete with larger countries with more predictable growing climates and so would have to keep its sights set firmly on the premium end of the market.

This approach set the industry on a path through the 1990s where, even if not every wine produced came close to hitting the bulls eye of being appreciated as fine wine, it nevertheless remained an almost universal goal.

While the lack of scale mantra has lived on, the fine wine goal and small scale quality ethos was certainly harmed during the last decade. New Zealand sauvignon blanc and many of its other white wines, especially, have expanded in such a way that the scale of production and the almost formulaic recipe have reached the point where the phrase “industrial winemaking” is widely used.  It is now highly arguable that the country, which produces more sauvignon blanc than any other New World country and is second in total hectares planted only to France, is hardly consistent with the notion of small scale and high cost relative to its competition. 

The question is, therefore, whether an industry that has heavily converted to production principles based on notions of scale-driven economics and brand marketing can rediscover its roots and return to the approach of a fine wine producer – a “fine wine industry”?

Is the Notion of a Fine Wine Industry an Oxymoron?

From an economist’s perspective, the answer to this question would be no.  Whether an industry is comprised of large businesses or small, it is still an industry.  An industry can be made up entirely of one, two, ten or hundreds of small artisans and still be an industry.

So if a collection of wine producers in a region of France, Germany, California, Australia, New Zealand or any other country is devoted to the production and sale of wine that is intended for the “fine wine market” and any products of which could hypothetically be of interest to those consumers with a specific interest in fine wine (according to any of its definitions), it could well be argued that this subset of the wider generic wine industry is a “fine wine industry”.

There are certainly regions of each of the above-mentioned countries where there would be little argument that the large majority of wine producers explicitly aim to produce fine wine, as opposed to wine targeted at the “mass market” consumer.

It should be emphasised that the use of the adjective “industrial” to describe certain types of larger businesses with a larger scale investment in producing assets and equipment that is clearly not “artisanal” in nature, is meant in quite a different context.

Quite where the border lines might sit is another matter again.

It is, of course, quite possible to look at some of the pinnacles of the global fine wine industry, the Premier Crus of Bordeaux, and to see that these unquestionably fine chateaux blend an artisanal, almost small-scale attention to detail with facilities and processes that are far more akin to the industrial in nature.  If it is accepted that there is such a thing as a “fine wine industry”, the technology employed is not likely to bear scrutiny as a criterion for membership.  The end markets are quite a different proposition.

Two industries in one

It is, of course, valid to ask whether New Zealand has ever qualified as a “fine wine industry” to begin with.  While few would question the assertion that New Zealand wine even 40 years ago was a barren desert with very scarce oases, the period from the mid 1980s merits examination.  This was a time when exports were a small portion of overall production, and when the production that was exported (primarily to the UK) was largely directed into fine wine specialist retail channels.

Domestic overproduction led to price wars that threatened the solvency of most of the larger wine companies during this decade.  The result was a government funded vinepull scheme which had the main consequence of resulting in the uprooting of large areas of hybrid grape varieties and lower quality high yield grapes such as Muller Thurgau, and eventually replanting to higher quality vinifera grape varieties such as chardonnay and sauvignon blanc.

This was also a decade of geographic expansion into new areas, including the likes of Waiheke Island, Martinborough, Central Otago, Waipara and Canterbury, Nelson and other regions.  The early and second wave pioneers in these regions were almost completely focused on production of quality wine based on growing quality grapes, notwithstanding that they were often hindered by typical pioneer problems as they learnt the lessons of their new terroirs.  Within regions such as Marlborough this was the period when the first of the early big company contract growers started to allocate production to their own labels, with expansion into newer sub-regions such as the Awatere Valley.

The 1980s was the decade when Te Mata Estate launched Coleraine, and when the Gimblett Gravels region was “discovered” and first planted.  It was the decade when the early big 5 of Martinborough all launched their pinot crusade, and when St Helena won a gold medal for its first Canterbury pinot.

This was also the period when the early international competition successes with Marlborough sauvignon blanc of companies such as Montana and Hunter’s was superseded by the spectacular success of Cloudy Bay.  This was not lost on the older established, mostly Auckland-based companies that were evolving their own product portfolios into higher quality varietal wines at the time.

The industry of the time was not purely small-scale.  Bag-in-box wines, nondescript easy drinking whites and cheap sparkling wines were still the core business of domestic wine retailers (but supermarket wine sales were not allowed until after a revamp of licensing legislation in 1989).  The volume of exports was insignificant when compared with domestic consumption, and imports substantially outweighed exports.

The period since has been marked by continuing market success and growth – and also evolution – for the industry.  It has been the subsequent dominance of the industry, and especially of the export side of the industry, by Marlborough and its sauvignon blanc that has coloured the perceptions of the nature of the industry.  Just as the whole of any New Zealand vintage often seems to glean its reputation from the fortunes of Marlborough for that season, usually inappropriately so, so the rest of the New Zealand industry seems often to gather its reputation from the stainless steel tank farms of large Marlborough wineries, producing container loads of wine for local and overseas supermarkets.

Despite the symptoms of industrialisation of production of certain wine styles as a result, much of the New Zealand industry has remained true to the quality goal.  Even in the “industrial heartlands” it has to be said that there is a low tolerance towards bad wine.  In regions trying to establish a name for other styles, and in particular red wines, that intolerance, in private, can reach almost religious fervour.

Smaller wine regions know that they have only one of way of marketing themselves, and that is a focus on producing high quality, individually distinctive wines. Several of these regions simply have nothing even close to a large scale production company among their number.

It should be noted that New Zealand is hardly alone in terms of these concepts.  It is not the world’s smallest producer, nor its highest cost.  Nor are the issues of economic scale and focus unique.

So the question remains: is it possible for an industry to turn history on its head and return to a fine wine focus above the volume imperative dictated by the huge investment in vineyard land and winery assets?  Indeed, is it possible to extract a fine wine message out of the marketing “noise” that naturally accompanies high volume retail brands?

Perhaps the answer is that there is a latent fine wine industry, which has never been extinguished, but that a way needs to be found to fully re-state that industry’s credentials to its own target market. The focus on promoting unique varietal terroirs, such as the Pinot Noir conferences and other symposia, is but a step.  Several other marketing initiatives are in train that are likely to focus on a similar message.  That message is that within New Zealand, for all the undiminished importance of Marlborough sauvignon blanc as the “cash cow” of the wider industry, a strong cadre of producers remains firmly focused on a different market altogether.


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