New Zealand’s wine industry has been on a roll lately, and things won’t slow down anytime soon.
In a recent blog, we discussed how the Marlborough region is becoming a major contributor to the NZ economy. Outside Marlborough, other regions are also making a name for themselves as producers of fine wine. Now, based on recently released data, things are looking brighter for the industry as a whole.
Tipped to Grow
According to a new industry report, the global demand for New Zealand wine is predicted to enjoy a huge boost this 2016, with some of the larger winemakers set to take advantage
In their recently-released Wine Quarterly Q2 2016, Dutch multinational banking and financing services Rabobank says demand for NZ wine will continue to grow this year. This is due, in part, to the country’s selection of cool climate wines. It’s prime position as a major exporter is also a contributor to this rising popularity,
Wine analyst and co-author of the report Marc Soccio says consumers in major wine markets across the world are willing to shell out a little more cash for lighter-bodied, more expressive wines. Something which New Zealand has plenty of.
The numbers show that this trend won’t change course anytime soon. “In fact, the growing role women and younger generations play when it comes to purchasing decisions only seems likely to support it further.” Soccio said.
This positive news on the increasing demand is also being matched by good news on the production side. Production volumes of wine grapes in New Zealand are expected to surpass 2015 figures, although within a manageable range.
“The volume of the 2016 vintage looks like it will be just right – it won’t be too big, yet it also won’t be too small for most companies entering the year with stocks erring on the tight side,” Soccio said.
Bigger Wineries, Bigger Opportunities
While the opportunities are available for all vintners and their estates, the larger wineries have the advantage, with their resources, equipment, and distribution networks.
“One of the key factors favouring New Zealand’s larger producers is their ability to source suitable distribution in key growth markets and channels. This is especially significant given the US, where distribution is so crucial to success, edged out the UK as New Zealand’s largest export market in 2015,” Soccio said.
As New Zealand winemakers up their game in quality and quantity, scale becomes an important factor. Not many vintners have the resources or the equipment to produce mass market wines.
Another advantage of the larger wineries is their capacity to grow a large percentage of their grapes, currently and in the future.
The limited market opportunity and the limited access to cost-effective supplies has put pressure on the profitability of small and medium-sized wine companies. For this, we can expect the smaller vintners to partner with others to take on the growing demand and market.
A Risk for Marlborough
While outlook for the Marlborough wine region and its renowned sauvignon blanc is positive, industry experts are raising concerns about NZ’s (over) reliance on the region and the variety.
In spite its popularity, there’s a debate about how New Zealand’s wine regions are flourishing yet the wine sector is largely dependent on one variety from one region.
There’s a small risk in this over-reliance, but one that’s increasingly becoming noticeable. The industry is expecting that, eventually, demand for Marlborough sauvignon blanc will plateau, maybe drop in some markets. This makes it all the more important for the wine sector to look into and invest in other varieties and regions.
“Marlborough wine companies are having notable success with pinot noir and pinot gris, while other regions, such as Hawke’s Bay and Central Otago, have their own diverse offering to bring to market, and they will continue to benefit as Marlborough-based companies seek diversification benefits elsewhere,” Soccio added.
Global Demand and Trade Partnerships
At the global level, New Zealand wines have a chance to boost their exports, as the 2016 vintage from Argentina, Chile, and South Africa are expected to drop in production.
The US is still the biggest market for NZ wines, due in part to the strong US dollar. There was also a notable rebound of import demand from China.
Just recently, Marlborough has sealed a new partnership with China’s wine growing region through a Memorandum of Understanding.
Marlborough Mayor Alistair Sowman signed the agreement with Ningxia People's Congress vice secretary Wang Ru'gui in Blenheim just this 20 April 2016.
Ningxia is the fifth-largest wine growing region in the world (the Napa Valley of China), while Marlborough accounts for 80% of New Zealand’s total wine exports.
The new agreement and the positive numbers all paint a bright and fruitful future for New Zealand’s wine sector, at least in the next few years. Hopefully, winemakers and other related wine businesses can take advantage and grow with the expanding market.