Tough times for wine(1)
Reality has hit the oversupplied wine industry, with some growers unable to sell their grapes and marketers in overdrive trying to sell wine. Laura Basham reports.
New Zealand has too much wine. The wine industry has been caught by a double whammy of two big vintages producing too many grapes, and a recession that has cut demand.
Nelson, the vineyards of which make up just 3 per cent of the national producing area, is caught in the maelstrom.
The grape harvest is just beginning in the region, and the industry is toiling on in the worrying knowledge that these are tough times.
Hermann Seifried, owner of one of Nelson's biggest wine companies, producing more than 100,000 cases, reckons grape prices will be down 20 per cent this year. Mike Brown, who chairs Nelson Winegrowers, estimates the industry is 20 per cent oversupplied with wine.
The oversupply is good news for consumers, who can pick up good-quality wine for $10 that used to sell for $20, but it's bad news for a grower who does not have a supply contract and cannot sell his grapes.
All wineries have fielded inquiries from desperate uncontracted growers. A worst-case scenario is their grapes will not get picked, and Mr Seifried expects there will be one or two of those locally.
Mr Brown says all the large Nelson growers have contracts in place, but some growers who have more recently planted or are small growers may have some difficulties.
This is not the first time the New Zealand wine industry's fortunes have plunged. Mr Seifried, who has been growing grapes since 1973, well remembers 1984-85, when he says more than 60 per cent of the wine industry was managed by receivers.
"Wine prices were unbelievably low. I have seen wine sold for less than its excise duty."
He doesn't expect anyone to go that low this time, but he knows of wine selling for cost price or less.
Mr Seifried describes the state of the industry as "pretty low", and expresses the hope that it can only go up. He recalls that the industry bounced back rapidly after the 1984-85 crisis, and the market just grew from there.
Last year it had a record vintage of 285,000 tonnes, and that's the problem. It is predominantly sauvignon blanc, and Mr Seifried says it has flooded the market at a time when money is tight and people are drinking less, drinking more cheaply and cutting back on dining out.
Mr Brown says there is only a small selling window for sauvignon blanc. "Once your new vintage is out, people don't want to know last season's, or only at a knockdown price."
He says that going into vintage, most wineries have more wine in their tanks and wine bottled in their warehouses than normal. "I would estimate there is 20 per cent more product out there than is sensible to have in the market."
The problem, says Mr Seifried, is "we have had it too good too long".
"Anything that has an enormous high will experience a low low, too. You see it in the venison and kiwifruit industries, and the wine industry. Now the reality has struck."
The industry has woken up to that reality. Early in the season, as the impact of the global recession hit markets, New Zealand Winegrowers urged growers and wine companies to reduce their crops and focus on lower vineyard yields to produce world-class wines.
The result is a crop reduced to 275,000 tonnes, but that is still a big crop, and there are 3000 hectares of grapes coming into production for the first time.
Mr Seifried says that even if growers have contracts, they have to meet strict conditions. Fruit must meet required brix (sugar) levels and be disease-free and without weather damage. "Once we had to accept that and make the best of it, but this year the companies have said, `We will walk away'. That's a new one."
Nelson Winegrowers also urged growers to reduce their crops, but Mr Seifried says Nelson is not so affected by overcropping because the region has a lighter fruit-set due to cooler flowering conditions.
