KEY POINTS:
Premium grape-growing land is running out, forcing more growers to plant in marginal areas to meet international demand for local wines.
And while such land might be cheaper, industry experts and practitioners say hidden costs can burn the unwary.
Rabobank Blenheim finance manager Tony Jordan said the bulk of areas best suited to viticulture had already been planted.
"There's only so much land you can plant grapes on," he said. "And people tend to push the boundaries."
While the cost of buying marginal land could be anywhere from $10,000 to $15,000 a hectare cheaper, soils high in sodium and magnesium could hamper production and additional investment would be required to store water and protect against adverse conditions, resulting in a net loss. "It could be more than the saving on the land value," Jordan said.
He advised such growers to assess carefully the economic viability of land that often lacked guaranteed access to water.
"They've got to have adequate water for the grapes which may mean they have to provide on-farm storage by way of dams."
Growers might also need to build reservoirs to pump water for frost protection. Helicopters and windmills were another expense.
"If you don't do adequate and sensible frost protection, you could have some major issues."
Marlborough grapegrower Dominic Pecchenino said the situation here was following a global trend in which "all the easy stuff gets developed first".
With an increasing need to develop on marginal land, grapegrowers were now expanding into areas they would never have considered five or 10 years ago.
"To get to the production level we're going to need to get to, we're going to have to develop in non-traditional grape growing areas."
Pecchenino, who has developed two properties on marginal land, said the process involved a "more intense management programme".
And that could mean added costs. "The land price won't be as expensive as the really good stuff so in a lot of situations you're saving yourself some money on the land price - but you might have to pay more to develop it."
He said that while it could be done economically, some grapegrowers had not done their homework and were having problems.
However, this country was always going to have climatic issues. "We're always going to have some influence by mother nature that's going to cause us some issues."
Land issues
* Grape-growing on marginal land is becoming increasingly common as the industry runs out of space.
* While the land can be cheaper, poor soils can hamper production and extra costs to ensure water supply and protect crops against frost can slash returns.
* This season's record harvest of 205,000 tonnes of grapes was up 11 per cent on last year but two-thirds of wineries harvested a smaller crop, with many blaming December's severe frosts.
