Hard times in the wine industry

In fact it would be hard to find a Marlborough business that hasn't benefited – directly or indirectly – from the wine industry.
 
OPINION: Nothing has shaped the history of Marlborough in modern times more then the humble grape. For the last 25 or so years grapes have pretty much shaped the future of our region.

From small beginnings our grapes – and the resulting wines – have catapulted the Marlborough region on to the world stage. Hundreds of millions of dollars have been invested in the industry and hundred of millions of dollars have been earned by those growing grapes and making wine.

Other sectors in Marlborough have also benefited from the wine money that has flowed freely through the province. The building industry benefited from the many new houses needed to accommodate all those coming to work in the industry.

Companies selling machinery needed to operate vineyards and wineries also saw a large income boost over the years.

In fact it would be hard to find a business that hasn't benefited – directly or indirectly – from the wine industry.

Good times for the wine industry meant good times for the whole of Marlborough. But times in the wine industry appear to be a little less good than they were a few years ago.

The international success of Marlborough sauvignon blanc triggered large-scale plantings in the region, but in the past two years unprecedented large vintages have sparked a reversal of the supply-demand ratio.

After 2008's record 285,000-tonne harvest, most wineries tightened up grower contracts, while some growers without contracts were left unable to find buyers.

Based on the prices being offered to growers so far this year – and the volume of last year's harvest – there are suggestions that as much as $100 million (or more) could be lost to the province this year. If you say it slowly $100 million sounds like a lot of money. That's because it is.

The loss of that much money is likely to have a substantial impact on the Marlborough economy.

Those most likely to feel the effect of the price squeeze are the people who borrowed heavily a few years back, with the aim of buying lots of land, planting grapes and sitting back and getting rich.

Those who bought in to the industry at the right time have made a lot of money but there are many grape growers out there with large mortgages and not much money coming in to service them.

As the housing market has shown in recent years prices don't stay down forever. Hopefully the wine industry is just experiencing a short correction period which may take a year or two to come right.

It may be that grape prices never reach the heady heights they once were but those with the ability to ride out the rough years will be in a good position when the turnaround comes.

But it's not all bad news though. The positive in the current lower price scenario is that more people now have the opportunity to try Marlborough sauvignon blanc and hopefully this will fuel demand as more drinkers come on stream and help to mop up the extra production.