KEY POINTS:
Delegat's Group has made export history with its Oyster Bay sauvignon blanc brand wowing enough Australians to make it the top selling white by value across the Ditch.
But two gathering clouds prevent its managing director, Jim Delegat, from basking fully in the glory of rising offshore demand for its higher value, lighter-style wines: a lack of land in New Zealand and the giddy ascent of the New Zealand dollar.
Oyster Bay sauvignon blanc - in the "super premium" segment that fetches between A$15 ($16.80) and A$25 per bottle - is the best selling white despite coming in at fourth place by volume, according to AC Nielsen.
"Oyster Bay sauvignon blanc's leading position by value in our market reflects a change in Australian wine drinkers' preference towards lighter wine styles such as New Zealand sauvignon blanc and ... the sauvignon blanc segment of the market is still very much owned by New Zealand," AC Nielsen Australia senior manager Matthew Knight was quoted as saying last week.
Delegat's, which listed last year, forecasts it will sell 270,000 cases to Australia this financial year, but analysts predict it will exceed that figure. Some 60 per cent of those will be sauvignon blanc, accounting for 10.4 per cent of New Zealand's total transtasman exports in that category.
Delegat puts the global shift towards lighter-style wines and more premium product down to factors such as growing consumer wealth and the fact that wine is increasingly seen as "an everyday affordable luxury".
"Super premium growth is driven by the affluence of consumers today seeking out the best the world has to offer - and that is the fastest growing segment of the category.
"With the affluence of consumers they're demanding the best; the intensely varietal wine styles that New Zealand are offering makes us a winner all round."
With New Zealand supply constrained by limited available land Delegat's, the country's third largest wine producer, has focused its efforts on the smaller quantity, higher value niche.
Delegat said: "Our strategy is to establish Oyster Bay as one of the world's leading super premium wine brands ... Oyster Bay has only had a market presence in Australia since 2003 so we are extremely excited about the success [it] ... has achieved there in a relatively short period."
A focus on sauvignon blanc has also allowed the company to bypass wine gluts in Australia and the US over the past couple of years resulting from bumper grape harvests.
"We're very fortunate - Australia is not known for its cool climate varietal wines."
However for the industry supply remains a problem despite New Zealand's wine exports increasing 30 per cent on last year, Delegat said.
"Supply constraints and unsatisfied demand are the biggest challenges facing the New Zealand wine industry at the moment. NZ will remain a small international player due to our geographical constraint."
However, Delegat's, which is estimated to already possess 21 per cent of available plantings in Marlborough, is still seeking to expand its crop.
"We have to carefully establish ourselves in other regions as Marlborough becomes increasingly planted out - that in itself is a challenge."
In the meantime, a new $73 million winery in Marlborough's Wairau Valley, which last year's $45 million float helped fund, provides extra production capacity and Delegat's' 50.1 per cent takeover of Oyster Bay Vineyards has boosted its supply of sauvignon blanc grapes.
With those developments, Delegat predicts this year's harvest will weigh in at between 19,000 and 20,000 tonnes.
"There's every indication we will be on or near our expectation - so we're very comfortable with our supply this year."
Analysts say those factors put Delegat's in a good position to ramp up its sales to the US.
The US is its third biggest market and important for the company's growth.
The company has invested in new distribution channels and maintains several marketing teams in the US.
But with 30 per cent of exports heading for the United Kingdom, for the time being the company's key export currency is sterling, which has not risen as much as the greenback.
Nevertheless, Delegat acknowledges that the kiwi's surge against the US dollar is "very serious" for his operations in the US.
"It has a profound influence on profitability. Foreign currency is always a risk, and we have to manage it through good treasury policy.
"The tide comes in the tide goes out. We have planted vineyards with the expectation of growing markets - and currency will not change our view."
Delegat's Group
* Revenue in six months to December 31: $60.3 million.
* Half year net profit: $6.3 million.
* Shares floated on the NZX in April last year at $1.40 each.
* Since then they have traded as high as $2.83.
* They closed at $2.57 on Friday.
