New Zealand Confronts Too Much Wine

The Gisborne region takes the brunt of a grape glut as its largest producer cuts back


Grapegrowers in New Zealand's Gisborne region are facing an uncertain future after the country's largest wine producer, Pernod-Ricard, announced it will significantly cut back the amount of grapes it buys from the region next year. Gisborne growers fear they are bearing the brunt of New Zealand's nationwide problem of an oversupply of grapes. How they deal with the impending crisis could be crucial for the country's wine future.

After more than a decade of rapid growth, New Zealand is starting to feel the effects of planting too many vines. In just the past six years, the country's wine exports have risen an average of 27 percent a year, according to an industry analysis by Citigroup. But all the new vineyards, combined with record crops in the past two vintages, have created too much wine. There's now a 70 million liter gap between how much wine New Zealand produces and how much it sells, according to the New Zealand Winegrowers, an industry trade group. In Central Otago this past harvest, some growers left grapes on the vines to rot.

Gisborne, which lies on the North Island, doesn't have the glamour of other New Zealand appellations such as Marlborough and Central Otago, but has long been a source of low-cost Chardonnay. Most of the local growers sell their grapes to wineries. Pernod-Ricard's New Zealand division is the biggest buyer.

But in the current economy, Pernod-Ricard New Zealand managing director Fabian Partigliani said the company, which bought 45 percent of Gisborne's crop in 2009, needs to bring its grape supply back in line with market demand after two record-breaking vintages. "Like all companies, we operate in a market that is directed by the laws of supply and demand, and the wine industry needs to restore supply-demand balance as quickly as possible," said Partigliani.

The move is also motivated by sluggish sales of Chardonnay. Despite the company's marketing attempts to improve Chardonnay sales, Partigliani said, domestic and international demand has continued to soften as Sauvignon Blanc growth has taken market share from Chardonnay. Cutbacks will limit the supply of two of Pernod-Ricard's Gisborne-sourced brands, Montana Gisborne Chardonnay, and sparkling wine label Lindauer.

Pernod-Ricard NZ first informed its 42 growers of the cutbacks in July, offering them the choice of a two-year contract wind-down or an immediate buyout of their contracts.

But the growers say the compensation package is an insult. According to grower Tom Brodie, the company has offered growers just $100 per ton. "It's just rubbish," said Brodie. "What they're offering us is less than a quarter of what we'd usually expect. While there might be a few that have signed up to get it all over with, most of us are standing fast and looking at the legality of it all."

New Zealand Winegrowers statistics show the average price for Chardonnay ranged between $725 and $908 per ton in 2009. The Pernod-Ricard NZ offer would be an 80 percent decrease.

Brodie said the problem is not just about Gisborne and Chardonnay. "It's because Marlborough has a problem with oversupply," he said. "But we're the ones coping with the short end of the stick." The move may push growers out of the wine industry and into other crops such as apples and kiwis, he added.

James Millton of Millton Vineyards said the cutbacks will hit the community hard, as the wine industry provided wide-scale employment, particularly for the indigenous Maori people. "What Pernod-Ricard doesn't realize is that vineyard work is hugely important to the indigenous people of the region," he said, adding that Gisborne's population is 41 percent Maori. "Gisborne is the only wine region in New Zealand that can source its vineyard labor locally and doesn't need to rely on immigrant labor, like Marlborough and Central Otago."

Millton said basing the decision on Chardonnay sales is laughable. "Everyone is saying they can't sell Chardonnay, but Chardonnay is the biggest selling white varietal in the world. It's a myth."

While growers are unhappy with the move, John Clarke, president of the Gisborne Winegrowers Society, said it could provide the region with an opportunity to set itself apart from the corporate influence of Pernod-Ricard NZ. "There will definitely be a level of downsizing in the region," said Clarke, who is not directly affected by the cutbacks. "But the move has attracted a huge amount of interest for the Gisborne region, and the message we're hearing is that Chardonnay is not dead. So while it might be hard for growers right now, we need to look at this as an opportunity."

Clarke said that the cuts could lead to more boutique, grower-owned labels from the 2010 vintage onward. Milton agreed that the move could provide the region with an opportunity to re-brand itself. "Wine consumers globally are looking for the place with 'somewhere-ness' when purchasing, and Gisborne can provide this. Gisborne has the ability to sell 'somewhere-ness.’ Growers who were used to an annual check from Pernod-Ricard will now need to be more innovative and find a way to make their land work."

Millton suggested the move may bring around the advent of cooperative wineries to allow growers to process their crop and take on marketing themselves. "Out of the storm comes opportunity. We're getting some maturity in the vineyards now, with some vines being between 20 to 25 years old now, so they have the potential to create some wines of character."