Wine victim of its success?

New Zealand's wine industry, led by Marlborough sauvignon blanc, has experienced a dream run in recent years, but that has been corked. RACHEL YOUNG talks to wine insiders about how the past two harvests could tarnish the industry's image and result in sauvignon plonk.

Psst, want to buy some cheap wine? No need to go underground any more. Wine brokers' websites are erupting with sauvignon blanc. One website has 63 different sauvignon blancs for sale in bulk.

Fancy a litre for $1.10? Or how about $3.60? If you're looking at the high-end of the bulk market, there are $4.60 a litre deals available.

A plethora of wine websites is offering friend and family deals, cleanskins and discounted wines in a wide variety of wine, but sauvignon blanc is generally a staple.

Wineries have attempted to clear excess wine through bulk exports, the cheap cleanskins and lower-status brands.

There is a lot of wine out there that needs to be sold. New Zealand Winegrowers (NZW) puts the surplus at up to 30 million litres from 2008 and more than 10 million litres from 2009.

Thus, the antagonism has started: one winery owner, who wants to remain anonymous, says "bottom dwellers" were buying cheap bulk wine at $1.50 a litre, which was lowering the profile of New Zealand sauvignon blanc.

"The whole brand of New Zealand sauvignon blanc is going to go down the toilet and no-one is stopping it."

Others disagree. Wine Marlborough marketing manager Marcus Pickens said the wine industry's strong brand values and high reputation was resilient enough to withhold the negative connotations attached to its new nickname, "sauvignon plonk".

"It's unfortunate [the nickname], but the way I see it the consumer still adores sauvignon blanc."

Marlborough wine sales had not been eroded, with the price of the region's wines holding up, and the industry is not cannibalising its own sales, but opening up new markets at lower prices, he argues.

But it remained to be seen whether these consumers would trade up.

"If you can get three bottles for 10 (NZ$22), why would you then pay 7 or 8 (NZ$15 to NZ$17) for one bottle?" one grape grower said.

If consumers found a cheap bottle of Marlborough sauvignon blanc they liked, then they might not trade up.

So is bulk wine a necessary evil? One Marlborough winemaker describes it as just that, and says while producing bulk wine was common practice among a few wineries, now it was done by almost every winery in the region.

Growers don't want to necessarily leave excess grapes on vines. They can't afford it.

One grower selling at $3.50 a litre explains: "From my perspective, it's a good position, but we are contributing to the abundance of sauvignon blanc, which isn't a good thing."

Saint Clair Family Estate owner Neal Ibbotson said the winery had sold bulk wine and introduced new brands as a direct result of the huge 2008 vintage.

Everyone producing excess wine in Marlborough was part of the problem, he said.

This year, the winery reduced its production by 20 per cent, so it would not need to sell bulk wine again.

A Blenheim-based grower, whose contract was dropped after this year's vintage, told the Marlborough Express he would make his sauvignon blanc grapes into bulk wine if he did not secure a contract.

A return on his product was better than nothing at all, he said.

How did Marlborough get in this mess? It is the victim of its own success.

The international success of the wine "brand" Marlborough sauvignon blanc triggered large-scale plantings and now the area under vine in the province has grown from 8539 hectares five years ago to 16,682 ha.

Increased numbers of vines mean increased production levels, but last year there was an unprecedented large vintage.

Nationally, 285,000 tonnes of grapes were harvested, with 69 per cent of production coming from Marlborough.

The region's vintage size increased by 61 per cent to a record 194,639 tonnes.

The region's flagship vine, sauvignon blanc, made up more than 50 per cent of the 2008 vintage.

It became known as a "sauvi-lanche".

In an effort to control supply for the 2009 vintage, wineries tried to place strict contracts on growers.

Stipulations included restricted yields and prices dropped if brix (sugar) levels were too low.

Despite these efforts, this year's vintage was still large, at 285,000 tonnes.

At the time, NZW said this was a big achievement, because an extra 2000ha came into production, which could have caused production to spike at 400,000 tonnes.

At an industry seminar, NZW chief executive Philip Gregan put the total industry stock at more than 300 million litres this year. Growers were left with unharvested fruit and wineries with excess stock.

The question became what to do?

Solutions? There were a few. Tipping excess wine was proposed, as was mothballing vines. Others suggested cutting their losses.

In the end, bulk wine exports that historically have accounted for less than 5 per cent of total export volume in the past year quadrupled to nearly 20 per cent as producers looked to shift excess inventories.

Wine exports across the Tasman rose 51 per cent to $323.3m, driven by Marlborough sauvignon blanc.

So what's the future? NZW has established a working party to look at supply side responses.

It explored funding vine extraction, the industry purchasing surplus wine and banning vine plantings.

Banning bulk exports was like "putting a bandaid on a cut" so that was ruled out, Mr Gregan said.

The focus needed to be on managing supply into the market.

A target of 165,000 tonnes of sauvignon blanc for the 2010 vintage has been set – down 13,000 tonnes down on this year's production.

Overall, the industry needed a reduced vintage of 20,000 tonnes to 265,000 tonnes.

This would require a yield which produced eight tonnes to the hectare.

To achieve this, some vineyards will need to be pulled, uncontracted planting needs to stop and markets need to be invested in.

A Marlborough winemaker said it would be a question of what was harvested from now on, not what would be ripped out.

The winemaker suggested that vineyards needed to be put into maintenance programmes with only market demand dictating when they would come back into production.

Wine broker Michael Selak said wineries needed to be careful when creating tiers, because distributors would focus on the lower levels, which would be easier to sell.

And wine consultant Rhyan Wardman was asking what would happen to the new, lower-priced markets after the surplus had dried up.

 

WHAT IS BULK WINE?

* "Large parcels of wine being shipped not in bottle to export markets."

* "Wine which is sold in tank as opposed to being sold in bottle, but then there is export bulk wine and another type of bulk wine is wine sold from one company to another."

* "At the moment it's anything that can't sell."

* "Anything that is exported in a tank rather than a bottle."

* "I think bulk wine is regarded as what people have surplus to their normal requirements."

* "Wine that represents an inter-company transfer."

EXPORTS

In the 12 months to August 2009

Exports across the Tasman jumped 50 per cent to 38.8 million litres.

Exports to the United States rose 22 per cent to 22.4 million litres.

Exports to Britain up 31 per cent to 39.8 million litres.

Bulk exports accounted for 99 per cent of the growth into the UK markets.

Sauvignon blanc made up 81 per cent of the 118 million litres exported.

Bulk wine shipments made up 27 million litres (about 23 per cent of total exports).

Bottled exports increased by 11 per cent to 91.3 million litres.

NZ Winegrowers projects wine exports will reach more than 170 million litres in 2014.

- The Marlborough Express