Looking at the big picture

 The wine industry in New Zealand has been in a bit of strife recently. Exports and sales of wines have been going swimmingly, but the people planting vineyards were a bit too enthusiastic, resulting in the supply:demand ratio, which has been very low for a long time, swinging above the 1:1 mark, beginning with the 2008 vintage.

The result? Prices for New Zealand's darling 1000-pound gorilla, Sauvignon blanc, have dropped this past vintage to less than half of what they were two years ago.

Bad news - yes! But it's not like it wasn't foreseen. New Zealand Winegrowers were telling the industry before the 2008 vintage that they should be cautious about planting more vineyards, as though exports were increasing (albeit taking a hit from the global economic crisis), they were about to be outstripped by new vineyards coming into production. Their predictions came true, only more so, because the vintage was bigger than pretty much anyone had guessed.

So NZ Winegrowers, on their yearly post-vintage summary seminar series around the country, spelled it out: There's too much wine in the tank, we don't need another big vintage (this would be made worse by the fact that another couple of thousand hectares of grapes planted in years prior were going to start bearing in the 2009 vintage). We need to work at the markets to sell the 2008 vintage, while still retaining the country's very high-value position in the market.

Others in industry saw the writing on the wall, and with NZ Winegrowers, suggested that people cut down their crops for 2009 in the most painless way possible: at pruning. Instead of leaving four canes on their Savvie vines, leave three, or better yet, two! This means that potential crops are lower, so there wouldn't be the need to spend money on dropping crop later.

Needless to say, not everyone took the advice, and though the industry managed, partly through less-than-ideal conditions at fruit set, to bring in a vintage that was just the same amount as in 2008, there was a high cost to growers, who 1) had paid people to lay down four, instead of two, canes at pruning, then 2) had to pay people to take off crop before harvest to meet the more-stringent terms of the contracts that they had signed with the wineries.

The contracts changed as a result of 2008, and for good reason. Previously, contracts had been arranged so that the winery would take all the fruit off of a vineyard - not so unusual when the demand outstrips supply. In 2008, there ended up being a lot more grapes in the vineyard than the wineries had counted on, meaning that they lacked to capacity to process it all quickly enough, and also lacked the tank space to keep it in afterward. However, many wineries took in all the fruit. However, after one vintage of that, and realising that the market wasn't going to soak up all that wine easily, they re-wrote the contracts to say that they would buy only up to a certain tonnage of grapes off the vineyard - anything beyond that, and they didn't _have_ to buy it.

This was much better for the winery, as they then could plan to take in as much as they had the capacity to process, store and sell. And, I have to say, it was much more realistic for the growers, as the market for their grapes was no longer a bottomless pit. No one should say that they weren't aware of what was going on! For years Sauvignon blanc was getting far more than a realistic price for what it was - there was definitely an imbalance there that was eventually going to be corrected.

However, these new conditions do make things harder for the grape growers. Now, instead of a gentleman's agreement as to how much was going to come off the block, there was a exact number that they needed to hit. This is far trickier for grapes that you might think (yield prediction is another whole series of blog posts!!).

So in 2009, many more growers realised that the old days are gone, and a new way of looking at grape production was a reality. And though the industry really did pull together and bring down the size of the 2009 harvest, there was still a lot of work to be done. Exports were still growing, but the size of the 2008 harvest meant that there was still wine from that vintage to be sold, and also a lot of 2009. The good news was that the '09 wines were really good - better than the '08s. The bad news was it was getting harder to sell the '08s when the better '09s were coming.


So the New Zealand wine industry entered into a market that it really wasn't all that familiar with - bulk wine sales. Large volumes of wine began to trade hands at very inexpensive prices. It was starting to allow the industry to catch up in terms of supply and demand, but it was also eroding at the hard-won high-value image that New Zealand wines had developed over the past couple of decades.

So that brings us to vintage 2010. Another critical year for the industry. Another 1500 hectares of grapes were coming into production over the 2009 vintage, yet there was still a lot of wine in tank. To continue helping the supply:demand mix, the industry, in this case this meant the growers, needed to tighten their belts and produce a crop even lower than in 2009!

NZ Winegrowers were at the forefront of this push, delivering the message in a number of venues that in order for the Marlborough Sauvignon blanc to retain its highly sought after position in the international marketplace, yields must be kept down.

And do you know what? It looks like the industry may have done it. The final numbers aren't in yet, but it looks like the vintage will be a significant amount lower than in 2009.

As someone connected to the NZ wine industry, that makes me feel very proud! To have an industry filled with the range of large to smaller scale growers actually pull together, despite the economic hardship, and make a dent in the national production of winegrapes is phenomenal.

And how was this done? It was through the efforts and sacrifices of many, yes, but at the start of it all was NZ Winegrowers. They were the ones who were taking the "big picture" view of national production and how it was fitting into the global markets. They are the ones that went out and promoted the message that the industry, as a whole, needed to hunker down and get serious, for the benefit of the industry as a whole. They are the ones who looked at export and production projections and said we need to hit this particular target in 2010.

The unified nature of NZ Winegrowers is, I am of the firm opinion, a major reason why the NZ wine industry has been so successful. Unlike in other countries, we have had a single body representing the national industry for many years - this has provided a unified message to the rest of the world about New Zealand wine. Its generic marketing has allowed for a Brand New Zealand to be cultivated, which benefits behemoth Pernod Ricard and the little guys, such as the wineries in the Family of Twelve.

So this is why I get a bit miffed when I see headlines like this:

"Winegrowers warned after complaints"

"Winegrowers ticked off by Commerce Commission"

The articles make it sound as though NZ Winegrowers have been coercing growers into dropping crop. From my point of view, which I hope is now very clear, NZ Winegrowers has been make a very convincing case of reasons to limit crop, and people have had ample evidence that NZ Winegrowers knows what it's talking about after the 2009 vintage. The group has been doing what is best for the industry as a whole. They certainly have not been forcing people to drop crop! It is to this industry's credit as a whole that reason has been listened to, despite the hardship, and growers have pulled together to get the industry back on track.

My congratulations, and thanks, go out to all those who have heeded the call, made the hard decisions, and hopefully, will reap the benefits as soon as possible.