Five Strategies for a More Sustainable and Profitable NZ Wine Industry
It may be entirely moot, indeed pointless, to propose that an industry might return to its “fine wine”/boutique roots if that proposal is not based on actual strategies, on a series of tangible steps, to achieve the objective.
More importantly, the NZ wine industry has benefited immensely from its flirtation with “industrialisation”, especially where that may be blamed on our signature product – sauvignon blanc. The explosion of sauvignon blanc production was more than just a chase for money. It was based on demand, created by smart marketing and a process whereby New Zealanders actually learned lessons about world markets. We gained networks of contacts. We received substantial inward investment from companies that recognised our values as well as our product. We are much smarter/less ignorant regarding costs, product economics, pricing strategies – i.e. the fundamentals needed to survive in a global marketplace. This is critical in the sense that the industry is now a vastly larger beast than it was 10 or even 5 years ago – as we go about changing, we will still need the rest of the world on side with us; and we will continue to need to be smart enough to compete.
Losing the good things we have learned in a blind rush backward towards an illusory memory of a golden era (which really was not) would be a retrograde step.
These are the broad steps needed in unison to take a significant industry, farming over 30,000 hectares, capable of processing almost 300,000 tonnes of grapes, and exporting more than NZ$1 billion of wine, and changing its nature into one more likely to ensure the sustainability of the industry as a source of wealth and income to its members and to the wider economy.
Most of these can practically be implemented at any level of the industry, from an individual grower or winery through to a region, through to the country as a whole. The intention is to achieve an industry that is stronger both in practical and economic terms, and is less vulnerable to external shocks or fashion changes. Moreover, even the healthiest wine sectors of other countries are not without their own problems. Even so, as a statement of a general target, we could do a lot better than to emulate a region such as Champagne – recognised the world over for its name, which stands for quality and luxury, yet produces wines in extraordinary volumes, often using ultra-modern technologies to do so, and which pays its growers grape prices that even our best growers today could only dream of.
The question is how to get there.
1. Upscaling what we have in the ground
New Zealand’s immediate potential is inextricably connected to the quality of what it has planted in the ground. For the most part our vines are young, an obvious consequence of a last decade of extraordinary growth. Some of the national vine stock has been marked by compromise, by the difficulty of obtaining the best quality clones and rootstocks in the past as demand has outweighed supply of top quality planting materials. There is still a material portion of our older vine stock affected by virus infections; the economics of these vines must look even worse with lower grape prices.
While we must be patient now and let the potential of our quality vineyards express itself naturally with age, where we have the wrong vines in the wrong places we must face this and continue to upgrade, to seek out better clones, better rootstocks, to plant using better trellising and with more quality oriented planting densities. As difficult as the concept may be at this point in time, the industry must not become afraid of investment – our competitors will not be.
For all the importance of improvement, the fact is that vine age is not something that can be rushed. It is the single greatest impediment not simply to producing quality, but to being recognised for a quality focus.
The nature of the problem can be shown by comparing the national vineyard today with that of 10 years ago. Based on national vineyard survey data more than 68% of the producing area was not there 10 years ago (excluding replanted and top grafted areas not apparent in the data). Making that look worse, the age of our four most sought after grape varieties is much younger with the less than 10 year percentages of pinot noir at 76%, syrah 79%, sauvignon blanc 85% and pinot gris 91%.
In other words, most of what we sell the rest of the world is from young vines, while what we drink at home is actually much less so.
The message is that it will take time for our vines to age sufficiently to overcome this quality impediment, but we should not be shy of other means to improve the quality of what we can produce from what we presently have, whether through replanting part (setting the age process back), or through keeping yields in check in search of better fruit (able to be made into better wines that are more likely to attract a premium price than poor quality fruit that may as well be dumped in today’s market).
2. Expanding where there is potential (and shrinking where there is not?)
Have all of the potentially great sites for growing wine in New Zealand already been planted? Frankly, to suggest that they have is ridiculous. New high quality sites are continually being turned up in the never ending search for better. That is how new regions such as Awatere, Martinborough, Central Otago, Waipara, Waitaki, Matakana, Clevedon, Ohau, Cheviot Hills and more come about. Unique terroirs are because they are, not because they have been discovered.
Placing an overt or even implicit prohibition on searching for new and better would be an extraordinary error. The NZ wine industry’s history is predominantly populated by pioneers; we can never stop history.
On the other hand, the planting frenzy in some regions over the last 10 years has resulted in extremely marginal sites being developed, sometimes for reasons more to do with property development and local zoning requirements rather than suitability for grape growing. If we are to better balance the industry, removing vines that can never produce suitable quality or saleability might be preferable to the removal of potentially good sites. That, unfortunately, may be wishful thinking.
Lack of diversity was ignored not so long ago. Now it is widely recognised as one of the industry’s biggest issues – the degree of reliance especially on one grape, sauvignon blanc. There are two main risks associated with lack of diversity: reputation (i.e. as a “one trick pony”) which may affect the market’s perception of the ability to do alternatives; and disproportionate downside risk if the areas of excess reliance go into decline (either in volumes – falling out of fashion – or values).
To give sauvignon blanc its due, it has given the industry recognition that might have been much harder to come by without it. It has single-handedly brought in foreign investment, earned large profits and funded significant elements of the wider industry infrastructure that we have today.
It has also been responsible for developing New Zealand’s unique stylistic identity.
The problem is not reliance, but over-reliance. The death of sauvignon blanc as a category has been widely overstated. Prices may have plummeted but the world is drinking more of it than ever. But can we keep those consumers if prices rise?
One way of keeping those consumers is to offer them alternatives. It is a process we have started, but not necessarily with full understanding of the consumers. The main drinkers of our sauvignon blanc are, first and foremost, white wine drinkers (so making good red wines is not a strategy for keeping these customers). New Zealand has long prided itself (until relatively recently) as being particularly strong as a producer of white wines. Yet compared with most other significant producing countries of the world, our range of varieties of more than just a few hectares planted is extremely limited.
Another question is whether we can adjust the perception of New Zealand sauvignon blanc by increased stylistic segmentation. This means not just hunting for super premium sauvignon icons, but active differentiation of Waipara, Central Otago and Hawke’s Bay sauvignon blanc styles from those of Marlborough and perhaps even actively promoting the distinctiveness of Awatere or Waihopai Valley fruit (by way of example) over “generic” Marlborough.
Nationally, improving and diversifying a clear portfolio of other quality varietal wines, both white and red is important from the perspective of diversifying industry and producer risk. Nevertheless, we need to be clear about differentiating between wine styles that have potentially broader appeal (which sauvignon blanc has certainly gained) and those that are, by any definition, niche market prospects. The latter may not have the volume appeal, but may be able to command greater long-term consumer loyalty. Pinot noir certainly comes under this latter category. Syrah may do. Wines such as generic chardonnay and merlot, for example, do not unless consumers are given a reason to become attached to chardonnays or merlots that are resolutely of a specific place (as achieved by Burgundy or the Right Bank of Bordeaux, respectively).
4. Improving our credentials
Credentials are the cornerstone of marketing, but they start long before a product reaches the point of sale.
New Zealand is clearly conscious of this with long-term market strategies based on environmental qualities and sustainability. Yet most producers know that having staked claims to this territory the risk of being exposed as not living up to the ideals is greatly increased.
It is an unfortunate irony that a key factor in our ability to produce the styles of wine that we do, and which contribute to the country’s international image, is also responsible for some of the difficulties from a viticultural perspective: New Zealand is a long, mountainous and mostly very maritime country situated in an ocean capable of profound climatic shifts. We have warm and cool, damp and dry, not to mention wind and exposure to cyclonic conditions in some parts of the country. There can be no single (or simple) prescription for successful and responsible viticulture in such circumstances.
Maybe rather than following the rest of the world’s prescriptions for what represents sustainability, and especially the care for the land, we should be investing funds in the science of improving New Zealand’s unique soils using uniquely New Zealand products to reflect uniquely New Zealand eco-systems (aka “terroir”), for example.
Sometimes we seem to hide from the facts in the message we send the rest of the world, stemming perhaps from a complex that the truth might be misconstrued. We simply don’t have a “reliable” climate. We have genuine vintage variations and should not be afraid to admit it. Sometimes we struggle with conditions, but the whole world knows when regions of France, Italy and Germany are struggling with conditions too and it doesn’t harm their reputations.
Clearly if we want our products to be appreciated and priced for quality there are other credentials that are at least as important as sustainability. The subject of yields arises yet again, but this is merely one element of the overall package of how we send the message to the world that we really are good, conscientious, quality-oriented wine farmers.
In this respect the willingness of New Zealand wineries to embrace new marketing media to speak to the world’s consumers and opinion makers in a frank, open and honest way is an important lead.
5. Exploring new means of expression
While not strictly about “upscaling”, “diversifying” or “improving credentials”, there nevertheless would be value in a progressive shift of industry practices toward greater expression and individuality. The means of doing so will range from the vineyard to the winery.
In the vineyard individuality is, by definition, achieved by being different. Ultimately the key to vineyard expression is by making the choices – from what to plant through to how to grow and to harvest – that best reflect the needs and potential of the land.
Examples of practices in the winery could include: reduced levels of residual sweetness; greater use of wild yeast ferments, even if as blend components rather than totally wild ferments; and greater use of skin contact, especially for red wines, although not to the point of astringency from over-extraction (although sometimes one wonders if the winemakers’ definition of over-extraction has been slowly shifting to lower thresholds over the last decade, resulting in the sacrifice of structure and texture).
The Numbers Game
Just as the age of our vines is ultimately about numbers – about hectares and years, so too are all of the other aspects of the quest to upgrade the value of the industry.
The “ideal” set of numbers will not be dictated by what we want to do, but by the market and by where we need to be within that market if we are to achieve the other numbers, those of dollars, income and value, that will make the industry economically sustainable and fit for future generations to follow.
In this respect, recognising market niches also means recognising that the size of opportunities is never infinite. There is always a point where there can be too much. We appear to have carelessly crossed this line in sauvignon blanc, for example.
That line needs to be pulled back to the market unless there are good, rational grounds (not wishful grounds) for believing that the global market will expand sufficiently in volume and value terms to accommodate New Zealand’s current and future production. If indeed the global market is growing that way, we must also adjust our calculations to make allowance for the behaviour of our competitors.
Right now the formula does not look attractive, suggesting we may have somewhere between 15-25% too much sauvignon blanc in the ground that may not simply right itself with time. This would bring sauvignon blanc back down to around 50% of the total vineyard. We are almost certainly overplanted in some other varieties, although arguably not to the same extent – overplanting of other varieties has not specifically rebounded onto export returns or onto land values, for example, in anything like the same way. Most issues associated with other varieties can be linked to marketing issues as much as to production volume.
The other part of the equation not discussed here is the role and place of brands as the conduit for selling New Zealand wine. That is for another day.