Babich matures in market

A long-time domestic player, the West Auckland winemaker tastes the success of premium exports. DITA DE BONI reports.

Moving from a frontgate, fortified sherry producer to committed exporter of high quality varietal wines has taken Babich Wines longer than most other wellestablished vineyards.

But, driven by the arrival of cheaper imports and demand for higher quality wines, the West Auckland winemaker is now raring to tell the world about its transformation.

It has been a long ride from the 10ha West Auckland wilderness property planted in 1919 by Josip and Mara Babich. Like several others, Babich began its commercial life making sweet dessert wines favoured by the heavily Anglicised New Zealand palate.

Despite similar beginnings, the path of Babich Wines has veered slightly from its local competitors. A private, familyowned firm, it had eschewed exporting in favour of servicing the domestic market.

Babich built on its success with fortified wine by establishing a niche in the local market for reasonably priced varietals, dessert wines and signature product Fume Vert, a blend of semillon, sauvignon blanc and chardonnay that remains a popular seller.

But the company had to refocus its business in the wake of a burgeoning and increasingly sophisticated winedrinking public. The heavy importing of cheap Australian wine - which has beaten Babich on price - forced the company to look offshore for continued growth and expansion.

Babich rebranded its product and upped its price point, and now the modern challenge of a maturing wine producer awaits: convincing the world that its wine deserves the often premium price it fetches in foreign markets.

"When we decided to restructure our business with more aggressive repositioning, we had to forsake, to some extent, our lowend, generic and fortified product," said managing director Joe Babich.

Chairman and brother Peter Babich said: "We had come to realise that the [low price point] of our wine could be a negative factor. We stayed with it for perhaps two or three years too long, and perhaps gave our product the impression of being of lower quality."

An unfounded impression, according to the brothers Babich. Their father, Josip, the original Babich, planted his first vineyard in 1912 and oversaw the permutation of the frontgate sales business into a sizable domestic producer. Joe Babich said the Babich wines stayed at a reasonable price compared with competitors because "our father impressed on us the importance of good value for money."

The brothers also thought they were in a more stable financial position than others and were able to better swallow some of the cost of production. Either way, the cementing of Closer Economic Relations with Australia in 1981 pitted bulk Australian producers with highcost New Zealand producers, making competition at the low price end of the domestic market largely untenable.

"In 1967, we produced our first varietal wine," said Joe Babich. "Corbans had stolen the march on us, but soon everyone was doing it. The varietals had better health and made better wine.

"Pretty soon, food and wine clubs started popping up, and the `upandcoming' winemakers like myself, Nick Nobilo and George Fistonich started having tasting and swapping notes. We were making a good product that was attracting the attention of overseas critics - long before we were exporting over there."

Companies such as Montana and Corbans were exporting to Britain in the late 1960s, while Babich was gearing up for its most popular stint on the New Zealand market.

Between 1970 and 1995, the company experienced the height of its local popularity with 2 per cent of the domestic market. It was still dwarfed by Montana, but was branching out and buying land to plant exciting new varietals such as sauvignon blanc, shiraz and cabernet merlot.

"Our move into Gimblett Rd [Hawkes Bay in 1982] was an attempt to address our need to move into higher quality grapes," said Peter Babich. "We went into Gimblett Rd and planted 20 acres of grapes on bony stuff, and people said to us that we were mad.

"We finished up with 90 acres, and now there are around 500 to 600 acres around us."

The brothers now either own or partown vineyards in Gisborne, Hawkes Bay and Marlborough, as well as the homestead vineyard on Babich Rd in Henderson.

The company first exported in 1980 and the brothers giggled as they recounted how easy they thought exporting would be.

"A German guy rolled up the drive just before lunch, and ended up coming to lunch with me," said Peter Babich. "Three weeks later an order for a thousand cases came through, and a month later it was paid for. We never heard from the guy again, and think now the huge company he worked for probably didn't even know it had New Zealand wine in stock.

"That's the first and only time we thought exporting was easy."

The export markets took 10 years to establish and Babich now exports to Australia, Europe, North America and the Caribbean.

Several avenues of distribution in both Britain and the United States came to dead ends in the early days, as distributors went under and payment disappeared. Joe Babich said one initial problem was taking orders from foreign markets without researching or looking at the implications.

"In the UK you've got to get in with strong distributors and well-connected agents," he said. "We thought originally that as a midsized company we should pick a midsized agent, and although there is an element of truth to that, we learned that small players in a big pond means a lack of real market penetration."

Travel is now high on the company priority list, with agents working hard to get behind the brand and justify the high price point of the product (in England, the cheapest Babich wine is 5.99 - $18.80).

A ratio of just 18 per cent in exports five years ago has become 57 per cent, with the company hoping to boost that to 80 per cent. A contract to supply Tesco supermarket chain with Babich Syrah is one more for the company resume.

On production levels and the average selling price of a case, the Business Herald estimates the company's turnover at between $9 million to $14 million. But the brothers will say they produce up to 80,000 cases a year, bottled at a rate of 2000 bottles per hour, and like most New Zealand wineries cannot meet overseas demand.

There are now four labels representing Babich wine. The old green and white labels of the old "dry white" and "dry red" have all but disappeared to be replaced by the standard line and Winemakers Reserve, Irongate, and the toplabelled "The Patriarch" after father Josip who died, aged 87, in 1983.

Babich has a new distribution deal with Montana in the domestic market, and new international markets such as Japan are being researched.

While committed to making Babich "the finest wine company in New Zealand," the need to work with colleagues that are not only rivals but old friends in the international marketplace remains preeminent.

"The New Zealand winemakers' future is exports, but it really does require a strong group of New Zealand players," said Joe Babich.

"New Zealand product internationally is very small, but does well in the expensive part of the market, and we hope to continue contributing to that strategy."