Tough times for wine(2)

    In contrast, Marlborough has a big fruit set and its vineyard development has continued unchecked. It now has more than 520 grape growers and 16,000ha of producing vineyards.

    Mr Brown says the difficulty for Nelson is that it has been caught up in the fallout from Marlborough. He lays the blame on people entering the industry with a focus on short-term returns rather than wine quality.

    "The days of growers cropping at high levels, producing indifferent grapes and getting good returns, are well and truly over. Wineries have good memories. They want to work with growers that have supplied them with the sort of material they need."

    The reality has now hit people who thought that having a vineyard was a nice lifestyle and a nice business getting 15 tonnes to the hectare at $3000 a tonne, Mr Brown says.

    "Now you cannot put in more than 10 tonnes to the hectare, and you are getting $1800 a tonne. The impact of that depends on the level of debt those people purchased their vineyard and land at.

    "In Marlborough, that has been the undoing of people who entered the wine industry based on those sums. Like any business, you should base your figures on the worst-case scenario."

    Mr Brown says a lot of the land planted in grapes in Marlborough was planted by property developers or Queen St businesspeople who did not care much about growing quality grapes. "It is those people where the root of the problem lies. I am glad to see the exit of them from the industry."

    The focus has now shifted to growing quality grapes to make quality wines. However, Mr Brown reckons it will take a couple of years for the supply situation to come back into sync with demand. There has been a definite decline in planting, with nurseries slowing down, he says.

    In the meantime, wine companies need to sell their product, and it is hard going.

    Mr Seifried says his family's strong marketing and loyalty to New Zealand supermarkets when others were rushing to export is now paying off.

    He is finding that British liquor stores he has supplied for years, which were buying 2000 to 3000 cases, are halving this because of insufficient shop traffic. United States sales "have slowed to creeping speed". Still, he is in the unusual position of buying in wine, because he is short of red. "The market is changing rapidly. Once, only white wine sold, and suddenly the consumer wants red wine, and you cannot lose your market share."

    Mr Brown says that at a time when consumers are price-sensitive because of the recession, they can get some good wines across the varietal range.

    "Before, it was rare to see a good pinot for $20 or less. Now it is possible to get good New Zealand red in the $10 to $20 range. All of a sudden, there are some bargains there, and people are drinking New Zealand reds rather than Australian reds, which presented better value.

    "The winery has to meet the market and the recession. [It] is no good pricing your wine at a level where it is not going to sell."

    Mr Seifried says it means the price is being driven down, and he knows of New Zealand sauvignon blanc being landed in Australia for $50 a case. "That makes it extremely tough for people like us." Especially with 40 staff, a huge rates bill and a commitment to markets, but Mr Seifried believes his people are equipped to handle it.

    Smaller players such as Daniel and Ursula Schwarzenbach, owners of Blackenbrook Vineyard, which has 8ha of producing vineyard in Upper Moutere, are also watching the export market.

    Nelson is their most supportive market but they export 40 per cent of their wine to Switzerland, Germany, Singapore and Australia, and have just landed a market in the Netherlands, selling to an agent who wants their aromatics to supply to restaurants. "That's where we want to be - at the higher end rather than in Tesco or Waitrose supermarkets," Mr Schwarzenbach says.

    So far, they have not experienced a downturn. Their export and domestic sales are up on last year, and they have not discounted their product.

    "Once you start discounting, it's hard to get back," he says.

    They are managing to balance the right amount of volume with demand, but are being cautious and holding off on development. They have another 8ha of bare land they could plant but have decided not to. "We're going to ride out the next couple of years," he says. "Like everyone, we're just waiting and seeing."