Analysing wine's cash harvest

WINE COUNTRY: More than 75 per cent of New Zealand's wine now comes from Marlborough.
Andy Jackson

WINE COUNTRY: More than 75 per cent of New Zealand's wine now comes from Marlborough.


Last week I drew attention to the New Zealand Government's goal of doubling agri-food exports between 2012 and 2025.

I pointed out that our success over the last fifteen years has been fuelled by product price increases, and that we cannot rely on the next decade being so fortunate.

So how are we going to make the quantum leap we need?

In recent days I have been in Marlborough, supporting my colleague Marvin Pangborn as he led a group of Lincoln University students studying land use.

Inevitably, our field tour included a focus on the Marlborough wine industry.

If agri-food is defined widely to include wine, then Marlborough wine has certainly been one of the greatest success stories of the last fifteen years.

During that time, there has been a 12-fold increase in production. More than 75 per cent of New Zealand's wine now comes from Marlborough, and 86 per cent of that is Sauvignon blanc.

* Marlborough wine exports top $1b 
* Wine brands lose out in Air NZ shake-up 
* Proposed fee hike a blow to wine firms

The first commercial planting of grapes in Marlborough occurred in 1973, when Montana's Frank Yukich convinced his board that Marlborough's climate, with high sunshine hours, dry summers and cool nights, was the best New Zealand climate for wine grapes.

The early years were fraught with problems. Some of these were technical and they were solved over time, largely by trial and error. Other problems were regulatory, linked to adjacent land uses that were incompatible.

Sheep and crop farmers did not want spray-susceptible grapes anywhere near their farms, as this would restrict their weed and pest control practices, so the safest strategy was a district 'no grapes' policy. But eventually the economic returns from grapes became too great to ignore.

Then, in the mid 1980s, market development lagged production.

COLUMNIST: Dr Keith Woodford.
Martin Hunter

COLUMNIST: Dr Keith Woodford.

In 1985, the Government funded a vine removal programme with substantial cash compensation. Growers took this opportunity to pull out the old vines and replace them with better varieties, which was definitely not what the Government intended. However, it did set the foundations for the modern industry.

The industry also suffered considerable pain from the 2008 global financial crisis, but in the last few years has been returning to health.

Sauvignon blanc is a relatively easy grape to grow and yields are high, about 14 tonnes per hectare. It is also a quick wine to make. This year's vintage will be harvested in April and will be in stores and supermarkets by July. This year's Marlborough stock will earn about $400 million at farm gate and over $1 billion in exports.

Marvin Pangborn and I often talk about the industrialisation of agriculture as a global phenomenon. Marvin noted that the Sauvignon blanc industry provides perhaps the best New Zealand example of this. Processing and marketing is dominated by a small number of overseas companies selling under multiple and often romantic-sounding brands.

Romance is the branding image, but underneath it is all about scale of operation and tightly controlled operating procedures. The vineyards range from a few hectares to over a thousand. The winemakers own some vineyards themselves and have contract arrangements with other growers, who then grow to specifications determined by the wine company.

A few brave growers still sell their grapes on the spot market. This can work well, but it needs a strong appetite for risk and volatility.

The remarkable success of Marlborough Sauvignon Blanc is linked to the unique regional brand, which relates to the unique climate-driven characteristics of the wine. Other countries can produce Sauvignon blanc wines, but these generally sell for lower prices than Marlborough's. Long may that be the case.

Ad Feedback

The industrial nature of Sauvignon blanc production contrasts with New Zealand's other premium wine, Pinot noir. The Pinot grape is harder to grow, yields less, and the wine can be more troublesome to make. Hence, Pinot noir remains a craft, rather than an industrial, wine.

There are no simple answers as to why Marlborough Sauvignon Blanc has been such a success, but in essence it was the right variety in the right place at the right time. Wine varieties come in and out of fashion, but it has stayed at the forefront.

Also key to its success has been the initial role of entrepreneurs, followed more recently by the large international wine companies who have invested in Marlborough.

Given these companies control the total value chain through to international markets, it is not possible to know the real profits from their New Zealand operations.

This is because of the complexities and opportunities relating to transfer pricing. However, without the overseas capital, it is unlikely that the industry would have developed as fast as it has.

The further expansion of Marlborough Sauvignon Blanc is constrained. Currently there are about 23,000 ha of grapes in Marlborough and the best areas are almost fully planted. More importantly, grape growing in Marlborough requires irrigation, and in dry seasons there is no more water available. However, there will be some further production increases, largely from young grapes that are not yet in full production.

These limits to growth mean that Marlborough Sauvignon Blanc is unlikely to be the 'heavy lifter' that will lead to the doubling of New Zealand's agri-food exports by 2025. It will need to be other wines from other districts, or else totally different agri-food products. Next week I will talk about one of those products.

Keith Woodford is Honorary Professor of Agri-Food Systems at Lincoln University. He combines this with project and consulting work in agri-food systems. 

 - Sunday Star Times


Ad Feedback
special offers
Ad Feedback