Owen Hembry

Owen Hembry is the business news editor of the New Zealand Herald

Wineries unite to crack US market

$1.1b of wine was exported in the year to June. Photo / Thinkstock
$1.1b of wine was exported in the year to June. Photo / Thinkstock

Five wineries have joined forces to target the United States market, with plans for exports to hit nearly one million bottles within five years.

The US-focused joint venture Pacific Prime Wines - owned by the management team and Maimai Vineyards, Lake Chalice, Forrest Wines, Seifried Estate and Carrick Wines - was set up in February and sent its first shipment on July 4.

The company, which is distributing to 14 US states, has sent exports worth more than US$500,000 ($643,000) and expects to increase annual sales to US$10 million ($13 million) within five years - about 960,000 bottles.

Pacific Prime Wines director Dave Nicholas said most wine businesses were distributed in the US by an independent importer.

"And of course once you do that you've really sacrificed all of your control and access and relationships in the market to somebody who's not necessarily that interested in your future," he said.

Pacific Prime Wines had bypassed the importer tier and taken on that responsibility itself.

The joint venture's sales would be undertaken by its own people and distributors, which companies had to have to import wine into a state.

"You simply can't work around them, apart from one or two big states like California."

Pacific Prime Wines had one dedicated sales employee in the US, with plans for two more next year, as well as commission-based salespeople.

"As an exporter it's easy to make a sale and watch the container leave the shores of New Zealand [and] wait for your payment, but ultimately your brand won't succeed - and wine is a highly branded business, it's a very local business, it's a very personal business."

The wineries sell to Pacific Prime Wines and share in profits made by the joint venture, which is expected to become cash flow positive in about October next year.

The national grape harvest soared to 285,000 tonnes in 2008, which resulted in an oversupply that helped erode wine, grape and land prices, before falling back to 266,000 tonnes in 2010 and rising again to 328,000 tonnes this year.

New Zealand Winegrowers this year said it was comfortable with the size of the last vintage, with strong sales and a larger harvest needed to rebuild inventory.

"I think there's a perception the industry's still in the downward part of the curve but in fact we're starting to come back up the other side," Nicholas said.

The national export value of wine was $1.1 billion in the year ended June, compared with $1 billion the previous year and more than double the $512.4 million result in 2006.

Nicholas said New Zealand's premium position had been maintained.

"New Zealand wine just does not produce a dud and that's unlike any other producer that sells into that [US] market and it's meant we've been one of the fastest growing categories for the last five to 10 years."

- NZ Herald

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