These days, you'll need a "serious Lotto win" to start your own vineyard and winery. Photo / Jim Harris
So your dream is to wander at sunset through your own vineyard then, as the evening chills, you whistle up the dogs and turn for home, where there’s an open fire and a glass of your own label awaiting your opinion.
Maybe it’s best to freeze that frame in your head-movie until you’ve met Hawke’s Bay boutique winery co-owner John Loughlin.
The well-known businessman, who with wife Kathryn founded the Askerne Estate Winery near the foothills of Te Mata Peak 30 years ago, isn’t a killjoy. They too chased the dream and have enjoyed “enormous satisfaction” achieving it.
But behind the idyll of a home overlooking their vineyards and all the wine awards and recognition, Loughlin says there’s been sacrifice, sweat and tears, forsaken overseas adventures and an investment that runs into millions of dollars.
It was a big enough challenge starting out three decades ago, he says, but these days, with land prices, capital, compliance and other costs and inflation, he reckons you’d need a “serious Lotto win” to establish a medium-sized integrated wine venture - a vineyard with its own winery.
“The cost pressures on the production side have been enormous - wage rates, excise going up, inflation, bottling costs... everything’s gone up except sale prices.
“To give a concrete example: we made our first chardonnay from the 1997 vintage and we won a gold medal and 4.5 stars in Cuisine magazine. We sold it for $24.90. Twenty-five years later we have a chardonnay that has had similar success and it sells for $26.90.
“That’s the big challenge of the wine industry, to find efficiency and productivity gains to try to offset the cost pressure. It’s certainly got a lot harder in the past six years. The working capital side of it is enormous.”
And those vineyards in the TV rom-coms “seem to need very little work, the birds don’t come and the weather is never a problem”.
The Loughlins started with 11 hectares of bare land, an old house and a mortgage. Today, after acquiring neighbouring land, they grow 17 grape varieties on 32ha.
To build Askerne, which Loughlin describes as a “tiny” player in the industry, he worked fulltime offsite and Kathryn ran the business. They reinvested every cent in the operation and lived in the old house on the original land for 23 years before rebuilding on the vineyard. The old house remains in the family. They employ a winemaker and produce around 8000 cases a year, with exports to the UK, China and Singapore making up about 10 per cent of Askerne’s annual production.
So if winemaking isn’t delivering riches (at least the financial sort), why buy more land?
“One of the ways to try to make money is to get a bit of scale and spread your fixed costs over more volume,” says Loughlin.
“You’re getting efficiencies on your fixed costs. It’s a race to try to get productivity and efficiency gains because the pricing just doesn’t support the industry like it used to.”
The couple have done extramural courses in winemaking, but as wine lovers, “we always had clarity about what we wanted to finish with in the glass, and what was a good wine in the style we were looking to make”, says Loughlin.
“You get enormous satisfaction when you make a wine that is everything you hoped it would be and you get recognition.”
But running an integrated business “is getting harder and harder”.
“We’re starting to see economies of scale really coming in. If you’re going to be small, you have to be really high-priced to make it all work.”
Most Askerne wines sell for about $25 a bottle, whereas the “average” price in New Zealand is $13-$14, he says. Askerne’s most expensive wines are around $60, but the volumes are small.
“Wines are being made now that are over $100. Not big volumes, but quite a number are around there.”
Loughlin notes the business is easier to get into for a winemaker with a little bit of capital who can buy grapes from a contract grower and use someone else’s facility to make wine.
“That way they don’t have to put up the capital for a vineyard and winery. They can then launch a brand based on their name and reputation. That’s a route a number have taken pretty successfully.”
Latest figures from industry group New Zealand Winegrowers show grower numbers fell in the 2023 financial year from 706 to 681. There were 739 wineries, compared to 744 the previous year.
Total New Zealand wine production was 360.7 million litres compared to 383 million litres in the 2022 year. Of the 2023 production, 315 million litres were exported, to the value of $2.4 billion.
New Zealand produces only 1 per cent of the world’s wine but has an international presence and reputation far exceeding that, particularly for its sauvignon blanc, says New Zealand Winegrowers.
Chief executive Philip Gregan agrees the capital cost of buying a vineyard is much higher than previously and therefore “a significant challenge”. But he says there are different ways to do it and the group’s membership list suggests “we are seeing new people all the time”.
But the fall in grower and winery numbers in 2023 suggests the industry is consolidating, which is in line with Loughlin’s suggestion that “with all the compliance work and costs these days, you need to be bigger and bigger to make it all work”.
“New Zealand has a massive challenge in the primary sector these days in that land is expensive, labour is expensive and capital is expensive. New Zealand doesn’t do cheap food. We sell to rich people. On an average basis, New Zealand wine is the first or second most expensive on shelves in most markets around the world,” says Loughlin, a professional company director whose many governance roles have included chairing kiwifruit marketer Zespri and the Meat Industry Association.
“If you’re trying to make a wine to go on the supermarket shelves... that’s a game for the big boys. You need industrial production systems and really low-cost viticulture and winemaking, and you’ll only make a tiny few cents a bottle.”
So who are the big players of the New Zealand wine industry and how many of them are foreign-owned?
Gregan said that at a winery production level, about 30 per cent could be attributed to overseas owners, and “roughly” 50 per cent of the grapes received by wineries were produced by operations with international investor interests.
According to the New Zealand Winegrowers’ 2023 annual report, of the country’s 739 wineries in that year, 646 were described as small-sized, 75 as medium and 18 as large.
“Small” was defined as those with annual sales not exceeding 200,000 litres. “Medium” had annual sales between 200,000 and 4 million litres. The 18 “large” wineries had annual sales of more than 4 million litres. For context, a case of 12 standard-sized bottles amounts to nine litres of wine.
Coriolis Research’s latest report in 2020 for the Government on the country’s top 200 food and beverage producers named 19 wine producers.
They were: Lion; Delegat Group (NZX-listed); Indevin Group; Constellation Brands; Pernod Ricard; Villa Maria Estate; Treasury Wine Estates; Yealands; Giesen Wines; Cloudy Bay Vineyards; Sacred Hill Vineyards; Saint Clair Estate; Booster Wines; Accolade Wines; The Wine Portfolio; Craggy Range Vineyards; Allan Scott Wines; Mount Riley Wines; and Foley Wines.
Sacred Hill was put into liquidation in August 2021 and is still in receivership and liquidation, according to the Companies Office. Villa Maria’s former parent FFWL was also put into receivership after the Coriolis report was published: it has been bought by New Zealand’s Indevin Group.
When the Herald ran this company list - minus Sacred Hill and Villa Maria - past New Zealand Winegrowers, Gregan said the Coriolis report had missed some names. He declined to identify them.
The Herald elected to add New Zealand-owned Babich Wines to the top players’ list.
This brought their number - omitting Sacred Hill and Villa Maria - to 18, which corresponds to the New Zealand Winegrowers’ 2023 classification of 18 “large” wineries.
Of the 18, Herald research suggests eight are overseas-owned.
The New Zealand wine industry was founded on the entrepreneurial spirit of foreigners, dating back to 1819 when missionary Samuel Marsden arrived in Kerikeri, Northland with 100 vines which he planted at his mission station.
In the 1840s, British arrival James Busby made the first recorded wine, from a small vineyard he planted at Waitangi. The history books say it was his enthusiasm that encouraged other immigrants from Europe to set up across the country with vineyards and start winemaking.
New Zealand Winegrowers’ Gregan says foreign-owned companies have made “an incredibly strong” contribution to the industry. You only have to look at Cloudy Bay’s contribution to forging New Zealand’s reputation internationally, he says.
Askerne’s Loughlin says as well as the big international players featured below, he knows of “quite a few” foreign wine growers “often below the radar”.
“They’re from Switzerland and Japan and China, passionate people who put a lot in [to the industry] and often provide routes to market.
“A massive amount of capital and working capital is required in vineyards and wineries and we’ve needed that foreign capital to grow the industry. A lot of the growth has happened with New Zealand capital but the massive growth has been enabled by foreign investment.”
New Zealand’s largest alcoholic beverage company is owned by Japanese beer and brewing giant Kirin. It owns the Wither Hills and Lindauer wine brands. There’s no mention of New Zealand operations in Kirin’s 2022 annual report but filings for Lion New Zealand in the Companies Office show the business made a profit of $5.469m in the period from December 27, 2021 to December 25, 2022 - down from $13.496m. Sales revenue was $634.2m, up slightly on the prior year’s $628.8m. It was hit with higher selling and admin costs as well as other operating expenses.
The French wine and spirits giant, listed on the Euronext stock exchange, has the Stoneleigh, Deutz, Church Road, Brancott Estate and Montana brands in New Zealand. Founded in 1975, the international company is 14 per cent owned by the Ricard family. It has three wineries in New Zealand and vineyards in Marlborough, Hawke’s Bay and Waipara. Its New Zealand holding company, Millstream Equities, recorded revenue of $332m last year. This week it was reported that the company had enlisted two banks to conduct a strategic review of its New Zealand and Australia business, potentially leading to a sale. Pernod Ricard Winemakers New Zealand had revenue of $332m in the year to June 30, 2022 down slightly on the $338m revenue it made in FY2021. The company made a profit of $14.45m, down from $17.6m.
Owned by US companies CWI Holdings and Constellation International, the New York Stock Exchange-listed company’s brands in New Zealand include Kim Crawford, Selaks, Crafters Union and The People’s Wine. It has 2711ha of vineyards in New Zealand and two wineries. It sold New Zealand’s Nobilo Wines for $218m in 2021. The company, which also produces beer, says Kim Crawford is the No 1 sauvignon blanc and No 1 New Zealand wine sold in the US. Constellation New Zealand Holdings revenue was $285.6m in the year to February 28, 2023, up from $265m. Its profit for the period was $29m, up from $23m.
This Melbourne-based company was formerly the wine division of Foster’s Group. Listed on the ASX, its 2022 New Zealand revenue was $122.7m. It has nine New Zealand vineyards totalling 505ha and a winery in Marlborough. Treasury also has vineyards and wineries in France, Italy, Australia and the US. Brands in New Zealand include Matua and Squealing Pig. Founded in the 60s by the Spence brothers, it claims to have been the first producer of sauvignon blanc in New Zealand. Its other brands include Wolf Blass, Lindemans and Penfolds. New Zealand after-tax profit in 2022 was $11.2m, down from $20m.
This icon of the New Zealand export wine sector is owned by French luxury goods giant LVMH Group via Sydney-based Veuve Cliquot Properties. The brand was established in Marlborough in 1985 by David Hohnen, who sold to Veuve Cliquot in 2003. In 2014 the company acquired its own Central Otago vineyards. Brands are Cloudy Bay, Pelorus, Te Koko and Te Wahi pinot noir. Companies Offices filing show Cloudy Bay Vineyards had revenue of $76.7m in the year to December 31, 2021, up from $74.3m. Its profit was $9.77m, down from $11.05m.
Listed on the NZX, this company is 80 per cent owned by the Foley family of California, with about 6 per cent owned by New Zealanders. Established in 1988 as Grove Mill Wines, it merged with Foley in 2012. Brands include Vavasour, Dashwood, Grove Mill, Sanctuary, Te Kairanga and Mount Difficulty. The company also makes gin. Revenue in the 2022 financial year was $66.6m.
This producer of New Zealand’s Waipara Hills and Mud House wine brands is based in Australia. Owned by the private equity firm Carlyle Group, according to Coriolis, it claims to be the fifth-largest wine company in the world. Accolade Wines New Zealand had revenue from continuing operations of $53m in the year to June 30, 2022, down from $56m in the prior financial year. It made a loss of $2.025m, down from a profit of $990,000.
Jointly owned by Australia’s Tandom Pty and Chamois of Hong Kong, this operator has vineyards in Hawke’s Bay, Martinborough and Marlborough, producing from two Hawke’s Bay wineries. Its Craggy Range-branded wine is distributed in more than 50 countries. Founded in 1997, its revenue was $36.6m in the year to June 30, 2022, up from $34.5m. Its profit was $234,465, down from $3.9m.
What no one seems to argue is that the country’s biggest producer and exporter of wine - by its own claim, and general industry understanding - is the New Zealand-owned Indevin Group.
It is 92 per cent owned by Gregory Tomlinson and Joseph Wallace of Blenheim, according to the Companies Office. Founded by Duncan McFarlane in 2003, the private company has 5000ha-plus in grapes and four wineries.
It bought iconic New Zealand wine brand Villa Maria out of its parent company’s receivership in 2021 for $190m. The Coriolis report estimated its revenue in 2018/2019 was $275m-$300m.
Launched 20 years ago in Marlborough as a contract winemaker, it now has operations in that region, Hawke’s Bay and Gisborne, and says it has 3000ha of vineyards.
NZX-listed Delegat was established in 1947 and is 66 per cent owned by the Delegat family.
Its brands include Oyster Bay, Barossa Valley Estate and Delegat. The company, which says it has grown 22-fold since 2002, has 20 vineyards and four wineries, with sales teams in six countries. Revenue in 2022 was $325.6m. Last year it sold 30.3 million cases of wine.
Founded in 2008 by Peter Yealands, this Marlborough-based exporter’s brands include The Crossings, Babydoll and Yealands. In 2015, 20 per cent shareholder, Blenheim-based electricity company Marlborough Lines (ML), bought out the winemaker for $122m. Last year ML said it was seeking a strategic partner for Yealands. Yealands sources grapes from 1085ha and produces around 1.6 million cases a year. Revenue in 2022 was $93m.
This Christchurch-based company was founded in 1981 by the Giesen family and today is owned by brothers Alex, Theo and Marcel Giesen, who also operate the Kaiser Brothers Brewery. It has 13 vineyards in Marlborough and its brands include Giesen Wines, Ara and Marlborough Ridge. It is thought to be one of New Zealand’s top 10 wine producers by volume. Coriolis Research put its 2018 revenue at $70m-$80m.
Established in 1986 in Hawke’s Bay by David and Mark Mason, this company was put into receivership in August 2021, according to the Companies Office. It has six vineyards in Marlborough and three in Hawke’s Bay, and its brands include Sacred Hill, Rifleman’s, Wine Thief, Deerstalkers and Brokenstone. At the time of receivership, 65 per cent of the shares were owned by sole director David Mason. The Hawke’s Bay and Marlborough businesses have since been sold.
Companies Office records show 99.8 per cent of the company is owned by Dew & Company Trustee Services, Julie Grono, Sarina Ibbotson and Tony Ibbotson with 0.1 per cent held each by Neal Ibbotson and Judith Ibbotson. The Ibbotson family trust-owned company was established in 1994. Its brands include Saint Clair, Lake Chalice and Delta. Coriolis estimated 2018 revenue at $40m-$60m.
Wholly owned by the Booster Tahi Partnership of Wellington, part of a wider investment group, this producer was established in 2019, merging a number of family-owned and run wineries. Its brands include Sileni, Awatere River, Waimea Estate, and Bannoch Brae. Coriolis says Sileni Estate sold its assets and brand intellectual property to Booster in 2018, while the Awatere River and Waimea Estates were merged into the company in 2019. Coriolis estimated revenue to be $50m-$60m in 2019.
Established in 1990 by the Scott family, this winemaker was one of the first independent wineries in Marlborough. Its four vineyards span 100ha, including 6ha in Central Otago. Its brands include Allan Scott, Moa Ridge and Scott Base. Coriolis estimated revenue to be $15m-$20m in 2018.
This Blenheim-based company is wholly owned by members of the Buchanan and Murphy families. Founded in 1997, its brands include Mount Riley, The Captain’s Mistress and Seventeen Valley. Coriolis said in 2020 it operated seven vineyards in Marlborough and exported to Australia, Canada and the UK. Its 2016 revenue was estimated by Coriolis to be $15m-$20m.
Founded in 1916 by Josip Babich from Dalmatia, now part of Croatia, this veteran exporter claims to be the oldest family-owned winemaking company in New Zealand. It has seven vineyards and a winery in Marlborough and five vineyards in Hawke’s Bay. Its brand range includes Babich, Babich Family Reserve and Babich Black Label. Annual revenue is unknown.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
The dairy co-op says it continues to explore potential divestment options.