New Zealand is at a crucial point in its relatively short wine history. A country that has emerged over the last 15 years to become a benchmark in producing, quality, high in demand wine that has been able to mostly maintain its premium price position, even as its popularity around the world has grown. But the bulk of its success has come on the back of one particular region and one grape variety. Marlborough and Sauvignon Blanc. Is that a good place to be to drive, and secure future growth? Does it need to have more strings to its bow to cope when things get tough, like they have with the near 20% drop in the 2021 wine harvest? To help address those questions and assess its position on the world stage the New Zealand Winegrowers hosted an online debate, as part of its New Zealand Wine Week, with leading producers and world wine figures to look at where its opportunities and challenges lie in the future. Richard Siddle, who hosted the debate, was well placed to sum up the debate’s key findings.
The New Zealand Business Of Wine – 2022 and Beyond Debate was one of the key features of the second New Zealand Wine Week that ran in key markets around the world last week featuring a series of online tastings, masterclasses and the chance to discover and taste 100s of wines. Click here to find our more what happened.
It’s said we only really miss something when we can’t get it and that’s very much been the case with New Zealand wine in recent months, and, in particular the on-going shortage of Marlborough Sauvignon Blanc that has had had a knock-on effect around the world. It’s why there is so much attention on the potential size of the 2022 harvest and how far it might go to plug some of the gaps that have emerged on the back of a below average harvest in 2021 that saw a 19% drop in New Zealand’s overall crop.
It also reflects just how far New Zealand wine has come over the last 10 to 15 years and where it now sits in significance alongside the other major wine producing countries around the world.
Over the last decade New Zealand effectively achieved its 10-year goal of doubling the value of its wine exports to NZ$2 billion a year, with total exports for the year to June 2020 reaching NZ$1.92 billion.
In that time New Zealand has established a new wine category all of its own. Marlborough Sauvignon Banc. Other countries and regions around the world have their own classic Sauvignon Blanc style, but none have connected with the trade and the consumer as much as the distinctive Marlborough style has. So much so that it’s a brave wine buyer that does not have a Marlborough Sauvignon on their list.
Which is a great position to be in when volumes are high and you have enjoyed a strong harvest. A little more precarious when the pendulum swings the other way – as it did in 2021 – leaving supplies of New Zealand Marlborough Sauvignon Blanc in short supply.
The shortage has sent ripples across the global wine buying community as suppliers, importers and retailers have all seen allocations reduced, forcing them to look elsewhere for their Sauvignon Blanc needs.
Where next for New Zealand?
All of which has upped the ante on where New Zealand now sits in the global wine industry, the danger of being over reliant on one region and one grape variety and what it needs to do to move to the next level of its development.
Which is where the recent New Zealand Winegrowers debate comes into play. An opportunity for experts, both inside New Zealand and in its key markets, to assess where the country goes from here. To help meet that challenge was:
* Erica Crawford of New Zealand’s organic producer, Loveblock Vintners, who helped develop the world famous Kim Crawford wine brand with her husband.
* Matt Deller MW, chief global sales and marketing officer at Villa Maria, one of the country’s most iconic and influential wine brands, who previously worked for Constellation Brands on key brands like The Prisoner and Robert Mondavi.
* David Downs, a wider business expert and chief executive of the New Zealand Story Group that looks to raise the country’s economic and business profile around the world.
* Rob McMillan, who describes himself as a “banker to the wine industry” through his work at Silicon Valley Bank and, in particular, his annual State of the Wine Industry Report on the US wine industry.
New Zealand’s culture and values
David Downs kicked off the debate with an interesting assessment of what he sees as New Zealand’s overwhelmingly positive perception around the world as a beautiful country, full of amazing scenery, wildlife, flora, fauna and if you look hard enough hobbits left over from the filming of Lord of the Rings. It’s not just an image either, but a reality for the hundreds of thousands of tourists that used to travel to the country every year before Covid-19.
“But we also know that’s an incomplete picture of the country,” he adds. “There is much more to it than just natural beauty.”
It ranks first in a number of key areas including the “ease of doing business” to the “most trustworthy place to do business in the world”, the least “corrupt”, right through to having the “best human rights record” in the world.
Then there is its reputation of being a “large farm and the bottom of the planet” thanks to the provenance and quality of its produce, agriculture and farming sectors which is very much where the wine sector come in, he says. “We produce much more than we can consume ourselves and we produce it at a very high quality level. That’s a really key story for New Zealand.”
It’s an image and profile that New Zealand wine has been able to benefit from and fits in with the rest of the country’s trading position as a place that can produce quality products, but not a market for mass production, be it its dairy, meat or wine sectors.
It’s why pretty much across the board New Zealand’s main export sectors are competing on “value, story, provenance and brand” which are also “the attributes that consumers are now really valuing”. The one thing it can’t do it compete on price “as that is just a race to the bottom,” he explains.
It’s why New Zealand – at a government export level – has a whole campaign around the idea of “Made with Care” that plays both on the quality of its food, drink and produce, but that it is also a country that “cares about people, cares about the planet and cares about the products and quality that we create and it really resonates with consumers in all our priority markets that we have put this into,” says Downs with most products and categories seeing a 200% to 300% increase in sales on the back of the campaign.
That “Care” message has also been very much part of New Zealand’s approach to Covid and how the country as a whole has very much backed the stringent lockdown measures deployed by Prime Minister Jacinda Ardern, he adds. It also aligns with the Maori culture and traditions that are very much about “taking care of people and looking after people” embodied in the Maori word “Manakitanga”.
“That’s actually something that most New Zealanders do without even thinking about it. It’s part of what we are and what we do.”
Then there is the concept of “kaitiaki” which, Downs, says, is about the “long term guardianship of the land” where its people are there as “caretakers” of the land rather than “owners” then it does create a different outlook and perspective amongst its people. “It dictates how you behave.”
So it’s not surprising to hear the country is currently reporting record levels of “desirability” as a place to visit or do business with, he says.
The New Zealand wine producers on the panel were also keen to stress how important community is the country, but also in the wine sector itself. Erica Crawford says it has been essential that producers have all worked together as one, in order to make a name and voice for New Zealand in the global marketplace. It’s been crucial in how far the industry has been able to go in such a short period of time.
“We’ve always done it together. When New Zealand wine launchd onto the scene as an exporter we did it as one,” she says. “We are too small otherwise to be significant against any of the big players.”
Strong wine image
Matt Deller MW at Villa Maria was also keen to note that whilst all the positive perceptions of beauty, people and culture are great to have they are “proof points to the brand” they are not the New Zealand wine “brand” per se.
“I always think of the US consumer standing there looking at the grocery shelves, they are not thinking about sheep and Lord of the Rings, they are thinking ‘what’s this wine going to taste like and is going to satisfy my emotional and fictional needs’.”
The fact that so many consumers, in the US and around the world, now have a very clear understanding of what New Zealand is and tastes like has been a big plus for the country, says Deller. “That is a brilliant part of New Zealand as well. It has a distinctive flavour and taste profile and it’s a taste profile that people want.”
That coupled with strong stories around refreshment, sustainability and the environment have all added to New Zealand’s export success in the last few years.
“Demand for New Zealand and Marlborough Sauvignon Blanc in particular have never been stronger,” he says.
It has been those strong messages that New Zealand has built up over the years which have really helped the country in the last couple of years when its producers and brand owners have not been able to travel the world as they usually would, adds Deller.
Covid, after all, came to New Zealand just as it was trying to harvest its 2020 vintage and it has been coping with and managing the virus ever since, he says.
From a trading perspective Covid has certainly had an impact on New Zealand wine around the world, says Crawford and Deller.
It’s been fascinating, explains Deller, to see how Australia, for example, has rekindled its interest in Marlborough Sauvignon Blanc over the last couple of years, when previously it was more of a case of “familiarity breeds contempt” in terms of how people perceived it. “Covid encouraged people to go back to what was familiar and what they knew was going to deliver.”
Which, very much, played into the hands of Marlborough Sauvignon Blanc and the chance for producers to showcase some of the newer, less “avert, aggressive” styles that people may not have been aware of and introduce them to the “more interesting, compelling” styles that are now in the market.
Big and small opportunities
Crawford and Deller were able to share their experiences coming from different ends of the branded market – small and independent versus a global brand now operating in over 60 markets.
Crawford says Covid and all the lockdowns that have come with it have certainly helped smaller, niche brands get more interest from wine consumers looking for something new and different to taste and buy. Particularly around “new iterations of Sauvignon Blanc”. “We have definitely seen an interest and a surge around that as well.”
The challenge has been more in maintaining long distance relationships, particularly with so many of your on-trade customers closed. That’s when having good, strong and open dealings with your importer and supplier have been essential, she says.
“That was the biggest lesson learnt. We all did Zoom tastings, but then we evolved onto doing smaller vignettes on more specialist platforms. But relationships are so important in the wine industry because we are not selling toilet paper, we are selling a discretionary item that you don’t need in life.”
The Sauvignon issue
New Zealand may have gone into the Covid pandemic on the back of record export sales and a real momentum behind the sector, but it is now emerging in a very different position two years on.
All the talk over the last six months from major buyers is how they are having to find alternatives to New Zealand and live without Marlborough Sauvignon Blanc at just the time when they have customers falling over each other to order it.
The 2022 harvest could well re-open those floodgates, but Crawford and Deller both believe the 2021 shortage could actually have been a blessing in disguise for the long term health of the New Zealand category.
There was a feeling in the international trade, says Deller, that prior to the 2021 harvest it could have as much Marlborough Sauvignon Blanc as it wanted. But the reality is Marlborough as a wine region is 95% fully planted, in a cool climate wine region, that in prone to vintage variation,
The good news for Marlborough Sauvignon Blanc is that the last three vintages have been of exceptional quality that have really helped cement its reputation in the world as a premium, and, in cases, super premium wine region. “It means almost all the New Zealand wine in the global market is from brilliant harvests, that’s helping to fuel this demand,” says Deller.
That said it is still “frustrating” he says that on the back of this “surge in demand and interest in New Zealand wine” it had a harvest that meant it could not satisfy that demand.
“But then it was always going to happen. It was just a matter of when,” says Deller. “This harvest just brought it forward a little bit. What is has done is allow us to really re-position New Zealand wine and Marlborough Sauvignon Blanc in particular as a classic wine of the world and not a commercial b beverage.”
He add: “It’s astonished me how the mindset has changed both in the trade and with the consumer in a really positive way.”
It’s also been an opportunity to shine the light a little more not the country’s other varieties and the work that has been going on planting different grapes and looking to make more interesting styles of wine.
“We are starting to see more consumer interest in other varieties,” says Deller, who confirms Villa Maria has shipped 50% more Pinot Gris that it had budgeted for.
“It makes sense. If there is a shortage of Marlborough Sauvignon Blanc and someone is in the grocery story and there is a Pinot Gris with the Villa Maria brand on it, then why wouldn’t you try that?”
Whilst he understands why buyers have looked to replace Sauvignon Blanc from New Zealand by sourcing it from different countries he would argue other New Zealand styles have more in common with the Marlborough style then the alternatives might offer. Particularly in terms of the purity of fruit, vibrancy, juiciness and freshness in the wines that consumers are looking for.
“You get that from New Zealand wine, you don’t necessary get that necessarily from Sauvignon Blanc from other countries,” he says.
Crawford says producers have been hit by a “double whammy” of a short vintage, coupled with the problems in the supply chain which is making it hard to get wines they do have out to their customers – especially in North America.
There is, though, the question of what happens to the Marlborough Sauvignon Blanc category once its full volumes are back and buyers can get what they want. Will there be a push back from buyers for brands and producers to drop prices to what they were able to find elsewhere.
Deller strongly believes this is the time for New Zealand to stay strong and to build on what have actually been an increase in average prices – up in the UK to £7.85 in the last 52 weeks up from £7.29 two years ago, with Villa Maria up around £8.60 average with a shelf price of around £10. “That’s where we should be,” he says.
It still, he adds, has the opportunity to push its more premium sub-regional, reserve and terroir driven, single estate wines and add extra layers of quality to the Marlborough story.
“Every one of those wines is dramatically different from each other. The whole concept of Marlborough is a wine with a sense of place and can express really distinct terroirs and is a really exciting opportunity for the region.”
Crawford is also keen to push Marllborough’s diversity message and that there are so many different styles being made now, using concrete eggs and amphora and less oak.
“Innovation for me is really quite important to stay alive in this category too.”
It is also a country that is not held back by century old traditions and set ways of doing things. “There is no expectation of tradition,” she says. “That is why we were so successful with screw caps. We have got freedom to innovate and explore.”
She sees, in particular, big changes that can still be made in the winery and the actual winemaking to introduce different styles. Loveblock, for example, claims to be the first winery in the world to be using green tree to help extract tannins and act as an alternative to sulphur. The Crawfords personal take on natural winemaking. “We see great consumer interest in that,’ she adds.
Eggs in one basket?
David Downs says New Zealand’s big “challenge now” is how it takes the attributes and enormous gains it has made with Sauvignon Blanc and somehow applies them to its other varieties and wines. What can it collectively do, for example, to turn the dial on the quality of its Pinot Noirs and Chardonnays.
“Ultimately it’s not healthy to be over reliant in any single market or product,” he adds, but providing you have the “quality coming through on the other varietals and stories from other parts of the country” then the future is still very strong, but it is balance that needs to be carefully managed.
The exciting aspect of the New Zealand wine industry, says Downs, is that the main players and influencers, lead by New Zealand Winegrowers, are all pushing the same messages and is very “collaborative” and have the same values of quality, provenance, innovation and a desire to do things right and make wines in a caring way for the country, the planet and its people.
“We have got all the attributes and the levers and organisations like Villa Maria and Loveblock are the ones that can translate that out to consumers,” he explains.
That is what is going to help the country regain any market position it might have lost in 2021 and 2022 and diversity into new market, he adds.
Rob McMillan at the Silicon Valley Bank says it makes sense for any brand, product or service to look closely at having all their “eggs in one basket”. “Being so focused on Marlborough Sauvignon Blanc is great, but at some point there is going to be a change and it may not be a change that you want. A branding agent would look to bring other brands along as things tend to have a tendency to peak and fall, so you need to spread out your risk,” he says.
Deller certainly takes on board the message to push and promote a wider portfolio of wines. He actually sees a bright future for New Zealand sparkling wine and says it has all the credentials to make it mark in the sparkling category too.
“It’s been taunting us for decades. New Zealand sparkling wine makes so much sense on so many levels,” says Deller, who believes this could be the time for the country to, ironically, take advantage of supply issues elsewhere in the world and finally gain some traction in the sparkling category.
Crawford says New Zealand “needs to do better at telling the world about what we are and who we are” particularly around its strong record on sustainability and how as a nation it is united and together on the key values and principles that matter.
“New Zealand has got such a great story,” she adds.
For Deller it is all about protecting, pushing and promoting its premium position. If it can, together, get that right then it is going to be on the right tracks. “If we are vacating the sub £8 price point and leaving that for other countries, then so be it.”
Its future also has to be more aligned to other varietals and in the years to come it needs to find wider distribution for its quality Chardonnay and Pinot Noirs in particular, if it is to really enhance the quality image of brand New Zealand.
Downs summed up the session by looking at where New Zealand sits in being seen as a quality brand. For that you need to have “consumer demand, hight quality product, a brand that tells the story of that product and you need a channel to market”.
“All of these things are coming into alignment for New Zealand wine,” he says. “The next couple of years is going to be huge for the wine sector. It gives us this opportunity to really build on the value that has been created in the past to diversify and grow. So I am only hugely positive about the future.”