Wine industry looks to exports for survival

Press, 8 September 1989, Page 18

Wine industry looks to exports for survival

By

RICHARD CRESSWELL

Hard truths about the realities of the New-Zealand wine market in the late 1980 s, were underlined to a group of Lincoln College viticulture and oenology students in Auckland recently.

Both Nobilo’s and Montana, appeared more excited about export markets than the New Zealand domestic market. Mr Steve Nobilo, a principal of Nobilo’s, considered the local market “dead.” Many retailers and others involved in the industry, believed prices for New Zealand wine were too high. And while there may be some notable successes for New Zealand wine both in this country and overseas, producers and retailers believed the margins in the industry would tighten in the future. Mr Steve Nobilo said his company now sold 4000 cases a year to the United Kingdom, as well as clinching lucrative bulk export deals, including one for 10,000 cases to Sweden. “We deem the New Zealand market dead. The apathy of the New Zealand drinking public, cheap imports and sales tax are making it tough,” he said. Many New Zealand wine companies had been stung by the wine lake created in the mid-1980s, which saw savage price cutting and the eventual “grape pull,” in which growers were paid per hectare to pull out their vines. Montana, New Zealand’s largest wine company, based in Glen Innes, has an eight million litre capacity, and has found unlimited demand from the export market, but a lack of local support. The company’s assistant plant manager, Mr Mark Polglase, said the recent acquisition of P.enfolds had enabled the company to set up a new plant in Auckland using some of the equipment from the other company. The massive Auckland plant will handle all the processing of grapes from

Blenheim and Gisborne. But he said a small boutique winery was planned in Taradale, Hawke’s Bay, to process some premium grapes in the area, and some cask wine will be handled in Blenheim. The chief executive of the New Zealand Wine Institute, Mr Terry Dunleavy, said the recent Budget decision to tax all alcohol equally would cause problems for the industry. However, he supported the decision to sell wine in supermarkets, and believed the chains would also market premium fine wines as well. But this view is not shared by all, and some retailers believe the price cutting, which will be a part of supermarket sales, will cut out other retailers. Mr Jo Jakicevich of Glengarry Wines, a wine retailer, said the sale in supermarkets would cut out some traders, and while benefiting the consumer, would harm the producers. He said on value for price New Zealand wines would continue to miss out, as they faced stiff competition from cheap sources such as Chile, and Spain. Prices for New Zealand wines were an attempt to continue to recover losses from previous price cutting, he believed. Mr Jakicevich is also suspicious about the well publicised wine show successes which mislead the public and may benefit only the winemaker. “Awards also help retailers because it helps to sell the wine,” he said. He said the competitions did not mean much to most people and were obsessed with ity.Glengarrys operate seven stores in Auckland all supplied through one main warehouse, as well

as offering a substantial mail order service. The company had also planned expansion to Sydney but this did not go ahead. Company research had show that besides price, most customers were interested only in how the wine tasted. The company produces a monthly newsletter to promote wine and moves from region to region and country to country explaining the areas, varieties, and qualities of the different wines. He said the newsletter was written in language aimed at a 16-year-old. “We would refuse to sell them any alcohol if they came in, because we don’t sell to under age 'drinkers, but that is the level we are aiming at.” Npnetheless the company stocks a substantial cellar of premium wines, fully insured and sells to wealthy consumers. . About 55 per cent of Glengarry wines sold are imported, and 90 per cent of total sales are wine, eight per cent beer, and the balance, spirits. Mr Dunleavy said wine consumption in New Zealand had fallen from 51 million litres in June, 1987, to 44 million litres in 1989. He said consumption was still falling and would be further hurt by the sales tax. The institute had to win the battle to get wine taxed at a different rate from other alcohol. Another problem with the industry was the lack of promotion of wine, especially compared with countries such as Australia. The large companies tended to promote only their own products and smaller producers could not afford advertising or were not interested in it. Mr Dunleavy said that inspite of the lack of local support a major new

international group, New Zealand Incorporated, which will market Kiwi products in Europe, has chosen wine to lead the promotion. New Zealand wine had been picked ahead of dairy and other food products because of its image. As the market toughens up growers themselves will also be preparing to promote wine and to get a better deal for contract and other growers in the industry. The chairman of the New Zealand Grape Grower’s Council, Mr Ross Goodin, said many smaller vineyards were marginally economic and there would be attrition in the industry. He said, there were only 16 growers in New Zealand with vineyards bigger than 30ha but 209 vineyards of less than 2ha. Most domestic processing, marketing, and consumption was in the greater Auckland region and the East Coast, and larger companies had to take into account the cost of growing in the South Island, especially the Marlborough region. To protect and promote growers the council is proposing a levy of about $9O per hectare, or 1 per cent of gross crop value, to be used to run a national organisation. He said one of the most serious natural problems faced by growers nationally was birds, which destroyed about $4.5 million worth of crop annually. The levy could also be used to fund research into pest control and other developments.

Richard Cresswell is a part time student on the Lincoln College viticulture course