Wine boom not so savvy

David Ridley doesn't believe in expanding volume at the cost of value. Photo / Paul Estcourt

The wine industry is riding high on a wave of sauvignon blanc, the wondrous grape variety that in Marlborough is perfectly suited to industrial production on a large scale, driving profits for factory wine producers as energetically as it drives export volumes. But the first wine industry benchmarking report by international consultants Deloitte suggests that the fast ride to success offered by sauvignon blanc could lead to a fall unless wine producers tend to their long-term prospects.

Moet Hennessy New Zealand general manager David Ridley says: "If we go blindly after the golden goose we could be killed in its collapse."

Ridley is well placed to comment on the sauvignon blanc phenomenon as Moet Hennessy is not only the world's largest fine wine producer - with champagne brands such as Moet & Chandon and Veuve Clicquot as well as the ravishingly luxurious Chateau d'Yquem - it also owns Cloudy Bay, Marlborough's iconic sauvignon blanc brand.

Ridley also happens to have first-hand experience of the trauma of making fine wine in Australia, where industrial commodification of wine has been the industry standard in recent history. Watching highly respected brands such as Penfolds grovelling for scraps on supermarket floors from Melbourne to London via Milwaukee has made him highly sensitive to the ramifications of "succeeding by expanding volume at the cost of value".

The headline news offered by the Deloitte survey was that the smallest operators in the wine industry are not making a profit. Crimped by their small scale and high capital costs, producers making less than 200,000 litres of wine a year are losing money. As this relates directly to 89 per cent of New Zealand's 543 operating wineries, the survey results are of considerable concern, effectively confirming what has been painfully obvious for some years.

For Sam and Amanda Weaver, of Marlborough winery Churton, the struggle for profitability is all part of the plan.

"For us, the issue is that because we started from a small capital base, by the time we take interest and tax out, there is not much left over," says Sam Weaver.

But while cashflow is a principal concern for the business, the Weavers plan for that situation to ease as more capital is returned from profits, and margins increase as the Churton brand gains strength in its various markets.

"We have worked hard to develop and maintain markets where the quality and character of our wines is respected, where we can build on value," says Weaver, a veteran of the British and New Zealand fine wine trades.

Steve Green, of the Carrick Winery in Bannockburn, Central Otago, concurs.