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What is the state of the NZ wine industry right now?

Yesterday I had an enjoyable day visiting wine trade customers and prospects. Yes I know, not everyone stocks our wine and those that didn’t had excuses which I failed to outweigh.(#FAIL)

Here are my insights:
  • Not much has change in the past two years. Still heaps of crazy deals on offer as wineries try to clear surplus stocks of wine.
  • It is the wineries/distributors who are making the offers – so you can’t blame the retailers.
  • Google “$6.99 Marlborough Sauvignon Blanc” and you will find plenty of hits, mostly unknown labels and probably questionable quality.
  • But, I think there are signs that this is a stage on the maturity continuum from a new to a mature industry.
There are wine brands which are offering heavily discounted wine and in the process damaging their brand. How do we know they are damaging their brand? Just listen to what retailers are saying about those brands. If retailers say some wineries are damaging their brands then the consumer will hear the same. Even if the wineries sees it differently, the retailer’s perception about brand damage will become reality.

There are definitely a lot more wine brands than two years ago. Many of these labels (brands) are set up just for the purpose clearing wine and usually justified to protect another brand or are set up by opportunists taking advantage of low grape prices.

The real brand damage seems to be isolated to a minority. The 80/20 rule could be applied here. I would suggest 20% of the wineries are causing 80% of the brand destruction. And the discount pricing by 20% of wineries, is creating problems for the other 80% of wineries who actually want to stay in business for the long term.

It is not easy for wineries to stay in business, but we all need to very clear about our vision, goals, and strategies. There are many different drivers in the wine business, from the corporate brand who owns many international brands, labels and vineyards to the brand that owns many vineyards around NZ to the single vineyard winery like Grasshopper Rock. I wonder if some NZ wineries are struggling with understanding where they are headed, especially the mid-sized wineries who seem to be doing a lot of the brand devaluing.
May be these are the growing pains of an industry becoming more corporatized. An industry which has seen more wine become a commodity and price more important than quality. It is also a sign of immaturity in the NZ industry. New Zealand cannot compete internationally as a producer of the cheapest wines; too many other countries can do this on a larger scale with lower costs.

In my view the maturity in the NZ wine industry will come when we better value the story of individual vineyards. In future, the family or corporate who can have the most valuable brand/s will own or lease the best vineyards. Many vineyards are too young to know if they will be the premier vineyards but the time will come when it is clear which vineyards most consistently produce quality.

I actually came away from yesterday’s trade visits very encouraged despite the pessimism of some about the general state of the wine industry and a few feeling sorry for me trying to sell wine! I am excited because the awareness is growing that the world-class wines and labels will come from the single vineyard wines. This is where the real stories and brand values will be built.

This is why we established Grasshopper Rock ten years ago and why we decided to find what we thought was the best Pinot Noir vineyard site in Central Otago to build a great Pinot Noir brand from. To establish a great brand was our vision when we started and it hasn’t changed. All that has changed is that the site is better than we imagined and the industry has gone through a bigger crisis than we imagined. Aren’t we doing this for the next generation anyway?