New Zealand wine producers will face significant challenges over the next few years if export trends continue.
The New Zealand dollar has risen steadily for the past five years against currencies of its three largest markets—the UK, the US and Australia. Although this situation puts pressure on New Zealand to drop prices, high costs associated with producing relatively small volumes of wine has made it tough to do so.
‘In the coming years, New Zealand will have to drop their prices,’ said John Hancock, winemaker and part-owner of Hawke’s Bay winery Trinity Hill. He added that ‘efficiencies’ will come into play due to increased volumes being produced.
Production volumes doubled and export volumes tripled in the last 10 years. This trend is expected to continue. Larger wineries will be in a better position as supermarkets become flooded with cheaper New Zealand wine: they will be able to save on production costs as well as provide the amount of wine demanded by supermarkets.
At the same time, wineries may well have to offer discounts in order to get their wine on the shelves of the major supermarkets. Dropping prices means less profit but ensures sales, thereby offsetting the loss.
Another potential problem is the danger of Sauvignon Blanc becoming New Zealand’s only really viable and profitable grape. Export demand is centered on this varietal. While almost two thirds of all of the wine exported from New Zealand is Sauvignon Blanc, it only accounts for about a third of production. In response to the demand, New Zealand has increased plantings of Sauvignon Blanc dramatically and continues to do so, but challenges remain.
‘Sauvignon Blanc totally eclipses everything else we do so it doesn’t open doors, it slams doors in our faces,’ says Hancock talking of the difficulties with persuading retailers to buy other varieties of New Zealand wine.
New Zealand Sauvignon Blanc is distinctive. For all other varieties, New Zealand competes with countries producing comparable—and reputable—wine at better prices.
Written by Carolyn Hammond