Drink up, there's plenty to go round

By SIMON HENDERY

When Winegrowers chief executive Philip Gregan flashed a graph of past and future production in front of the country's wine exporters this week, it brought to mind an image of Auckland's CBD.

The bars for 2001, 2002 and last year were sturdy-looking office high-rises - testament to an industry that has grown strongly over the past decade.

But on the right loomed an intimidating Sky Tower - bar 2007.

In short, the issue facing delegates at this week's Wine Exporters' Forum was that given a continuing surge in grape planting, by 2007 the industry will be producing 9 to 10 million cases (81 to 90 million litres) of wine for export, three times present levels.

Is there a global market for that much New Zealand wine?

In his address to the conference, Gregan said the past decade had been one of "unparalleled success" for grape-growers and winemakers.

"By virtually any measure (with the exception of our domestic sales performance) the story has been about growth, achievement and stunning international accolades.

"We are world-leaders with sauvignon blanc and we have achieved the highest average selling price of any country exporting to the UK. These are huge assets on which to build for the future."

The jump in wine export receipts - from $42 million to $282 million over the decade - has fuelled enthusiasm for new plantings.

The total area of producing vineyards has more than doubled in the past six years, and is forecast to grow a further 32 per cent to more than 20,000ha by 2006.

But domestic wine consumption is expected to remain flat, so the industry will have to find export markets for this looming lake of wine.

On one level, the industry's recipe for export success has been a simple one - selling a unique style of sauvignon blanc (which accounts for 63 per cent of exports) to Britain (which takes 40 per cent of our wine) and to a lesser extent the United States (24 per cent) and Australia (18 per cent).

Winegrowers' promotions committee - a group of senior industry players chaired by Brian Vieceli, head of the country's second-largest wine company, Nobilo - last month produced a report on the future of New Zealand wine, which included a simple Swot (strengths, weaknesses, opportunities and threats) analysis for the industry.

The heavy reliance on high-priced sauvignon blanc, year-to-year uncertainty of supply depending on the weather, and increased competition from other sauvignon blanc producers were among the issues raised.

Gregan is confident that Winegrowers can increase exports by building on its existing marketing base.

But he warned the industry this week that they must be prepared to pay. Tripling exports over three to four years would require a total industry marketing budget of $35 million to $40 million a year.

On top of that, the promotions committee recommended that spending on "generic" marketing of "brand New Zealand Wine" should increase from 1 per cent to 1.5 per cent of total export values.

The Winegrowers board is considering that suggestion, which would lift its promotional spending to $11 million a year by 2007, funded through higher levies on members.

The question remains whether a funding boost will be enough to sufficiently increase sales in the boutique markets open to New Zealand wines.

British wine writer Robert Joseph told the Pinot Noir 2004 trade conference in Wellington this week that his compatriots took a "cheapskate" approach to their wine shopping.

Less than 4 per cent of wine in Britain sold for more than £7 ($19) a bottle, a price-point that most New Zealand exporters targeted, Joseph said.

He also warned against optimism that pinot noir would do for New Zealand red wine's global reputation what sauvignon blanc had done for white wine.

Pinot noir lacked the fruit-driven mass-market taste appeal of sauvignon blanc and British consumers had become more blase about wine in general, he said.

But Winegrowers' marketing manager for Britain, Sara Watson, told the exporters' conference that New Zealand still had huge potential to tap into, although more investment in marketing was essential.

The average price of New Zealand wine continued to outpace the rest of the market.

David Nicholas, director of export and marketing consultancy Wine Partners, warned that there had been little growth in the past two years in the £6-plus segment of the British market.

That top-end market amounted to about 2.4 million cases of wine, of which New Zealand already had a 10 per cent share.

"Increasing our share or increasing the amount sold at these expensive price points won't be easy," he said.

Time will tell whether the growing lake of wine will be cause for celebration or a reason for the industry to drown its sorrows.