Mike Paul on why New Zealand faces a critical year ahead

The next 12 months will be a critical period for New Zealand’s wine producers.

A recent report by Bibendum noted that New Zealand Sauvignon Blanc is losing ground to Sauvignon from Chile and South Africa in the UK, due to significant price increases. At around the same time wine writer, Jamie Goode, suggested that now is a good time for Touraine producers to promote their own Sauvignon, given the gap that has opened up by these increases.

If Philip Gregan (the chief executive of New Zealand Winegrowers) is correct then producers in New Zealand are not unduly concerned about the situation. He noted that “ We have returned to where we were in 2008”, in other words before soaring supply led to heavy discounting in the UK.  New Zealand, he went on to say,” never has been and never will be  a low cost wine producing country ”.

Producers will certainly be less concerned if the current generic strategy pays off. They are  in the process of broadening their distribution base for Sauvignon with the objective of becoming far less dependent on the UK. They are also broadening their varietal base and become less dependent on Sauvignon itself, and its this latter strategy that particularly interests me.

Currently in the UK off-trade Sauvignon accounts for around 85% of New Zealand sales and the New Zealand branded proposition is, for the short term at least, inextricably linked to Sauvignon in this market. Unquestionably this has served New Zealand well over the last decade by establishing the country in the consumer’s mind as a producer of high quality wine of an approachable style.

However the New Zealand ‘story’ also illustrates two dangers. Firstly, no one country can own a varietal and it is not that difficult for other regions to plant and\or market a varietal that has become successful elsewhere. If competing regions can come up with equally appealing wines, or similar wines at lower prices, then any competitive gain can be very short lived.

In the 90s there were those who thought Shiraz and even Chardonnay were real competitive advantages for Australia, but unsurprisingly they remained so for only a very short period. The same will certainly be true for Argentina with Malbec: hopefully producers there will draw appropriate lessons from other regions.

The more important danger is that producers over rely on varietal success and neglect developing their own individual brands. Whilst this is hardly a problem unique to New Zealand or indeed varietals (just look at Prosecco as a classic example ), producers there have been guilty of this too. How many brands, I wonder, can even aficionados of New Zealand Sauvignon really relate to? How many have a consumer franchise which is robust enough to imply they are not pretty much interchangeable? And at the other end of the spectrum how many are purchased because they are Sauvignon first, New Zealand second and the brand very much trailing behind in last place?

If I am right and too many brands are at best interchangeable then this implies that most producers are very much at the mercy of the market and their competitors. This remains an issue even if producers really don’t mind losing their UK volume, but with a record harvest the potential problem increases exponentially. Will all producers feel the same way, will they all have other markets for the ‘surplus’  to go to (unlike in 2008 )?  Because, if they don’t, how many ‘responsible’ producers will be able to avoid being dragged into the quicksand?

I’m generally very impressed by everything I read about New Zealand wines from a generic point of view and Brand New Zealand appears to be moving in exactly the right direction. However, it is arguable that the more successful a generic strategy, the more individual producers are encouraged to achieve their own goals simply by basking in its reflected glory…and the real danger is that basking and complacency too often go hand in hand.

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