Vineyard in receivership

Plunging grape prices have hit Marlborough growers hard. Banks have been supportive but their patience is running out.

Westpac pulled the plug on Aucklander Barry Sutton's Awatere vineyard last week, handing control of his two companies to accountants McGrathNicol.

Sutton is believed to be the first major Marlborough contract grower to go under since a destabilising oversupply in the 2008 harvest. Contract prices have dropped by about 50 per cent in the two years since. The price per tonne this year was around $1200, but dropped to as low as $350 on the spot market.

In 2008, contract growers were getting above $2400 a tonne.

While contract grape growers have the security of sales, prices are mostly negotiated year-on-year and are susceptible to market fluctuations.

Marlborough wine industry consultant Murray Paterson said he was amazed at how patient banks had been.

"If the prices don't lift this year, I suspect there will be more. There are a lot people who really have got to the end of their credit rating and they are very highly geared. I hope the banks continue, but they will eventually not be able to carry on themselves.

"They have been supporting the industry very well up to date, but they have obviously just reached the tipping point on this particular vineyard," Paterson said.

Sutton has been a provider to Villa Maria and Pernod Ricard in the past, and has run his vineyard under the names Awatere Vineyard Holdings Ltd and Awatere Vineyard Estates Ltd since 2004 and 2005 respectively.

Paterson estimated that as many as 30 other growers in Marlborough could be vulnerable. "I know that there are vineyards where the interest is being recapitalised. The banks are supporting them, but there is not sufficient coming in to cover the interest and the banks to date have just added the interest to the capital."

Sutton had 128 hectares in sauvignon blanc and a separate parcel of pinot gris. McGrathNicol said the vineyard would continue to operate, and was likely to go on the market.

New Zealand Winegrowers chief executive Philip Gregan considered Sutton's experience an inevitable consequence of market conditions.

"We know that these are very tough times, very tough times indeed in the industry. So, it is in some ways not unsurprising that something like this has eventuated" Gregan said.

While Sutton is the first contract grower to go to the wall in Marlborough, there have already been winery receiverships in Central Otago.

"There was a supply imbalance out of the 2008 vintage that unfortunately coincided with a strong New Zealand dollar and a global financial crisis, so it was a very tough time for the industry. So that supply imbalance caused grape prices to fall, bulk wine prices to fall and put a lot of pressure on both vineyards and wineries," Gregan said.