Challenging year ahead for wine growers

Last year one of Martinborough's best harvests coincided with the biggest financial crisis since 1980s.

Owner of Palliser vineyard Richard Riddiford said the wine industry should be prepared to make some difficult decisions this year.

"Price movement and adjustment is critical for growth," he said.

Only 10 years ago most wines cost about over $25 and it has now dropped to the $15 to $10 mark.

"People are drinking at a particular price point," he said.

Mr Riddford said the market would tell a winery if their price was too high.

"If you are not selling much it is clearly not worth it."

Since 1991 Mr Riddiford's vineyard has made a profit and last year was able to pay dividends to shareholders.

He said the key to a wine's success is exporting and brand recognition.

"The destiny of New Zealand wine was always going to be offshore."

He said there are not enough wine drinkers in New Zealand to sell their wines to.

Mr Riddiford said people who drink specialist wine like New Zealand Pinot Noir make up about 5 per cent of New Zealand wine drinkers, roughly 36,000 people.

He estimates even if he sold everyone of those people a case of wine he would still have an overwhelming surplus of wine to sell.

Wine-makers need to deal in reality and supplying supermarkets is the way forward if they want to make a dent in the domestic market in the next year, he said.

Supermarkets make up 70 per cent of the wine market while independent retailers and restaurants lag behind at 18 and 12 per cent respectively.

"If you don't deal with supermarkets 70 per cent of your market is gone," he said.

Mr Riddiford said he envisions the two main providers, Foodstuffs and Progressive Enterprises, will supply 80 per cent of the wine market some time this year.

He said what is happening to the wine industry is out of New Zealand's control but his winery is in a favourable position for the coming years because it is debt-free.

"That way we can handle anything the market throws at us," he said.

Despite being relatively content Mr Riddiford said wine is not an easy business to generate a stable cash flow.

He said vineyards need to be forward thinking and invest in their future by using sustainable practices.

"If we change the soils or contribute to global warming we will assist in the downfall of the industry itself," he said.

We are farmers after all, he said.

Chairman of Wellington regional wines John Bell said Martinborough needs to continue marketing the area as a quality wine region and the price needs to be kept up to reflect that.

"New Zealand can't afford to be a commodity producer, we will be wiped out by the big guys," he said.

We can't bend to market pressure; we need to maintain the price, he said.

Mr Bell said buyers and sellers of wine alike were being cautious. "People are buying cheaper wines and business is conservative."

Mr Bell said most wineries in Martinborough are no longer buying and selling grapes to other vineyards- a common practice just a few years ago.

He said he has noticed many vineyards have cordoned off sections of their fields and are only producing what they can sell.

Last year the harvest brought in more wine than most producers could sell, he said.

Mr Bell said there are some positives to come out of what many have described as the toughest year on wine.

"Asia has become a rapidly emerging market for New Zealand wine," he said.

Wellington tourists help keep the Wairarapa wine industry ticking, he said. "Wellington people love Wairarapa wines."

Martinborough vineyard general manager Janine Tulloch said she was certain the wine industry was not out of the recession yet.

"2010 will be another challenging year; we have been conservative with our estimates."

She said it is hard to guess how the year will go financially as the Christmas and holiday period is always booming.

"People are entertaining so they buy a lot of wine," she said.

Mrs Tulloch said the wine industry would be anticipating a sharp drop in sales once customers had fully shaken off the Christmas and New Year period.

If things pick up it will be 2011, she said. "We are waiting for summer to hit the Northern Hemisphere for more exporting opportunities."