Drinkers urged to stick to vintage Kiwi

By DITA DE BONI

Lacklustre grape harvests in the past two years and a growing market for cheap imported wine will cause domestic sales of New Zealand wine to slump about 2 million litres this year.

While exports are still growing - most exporting wineries are already stripped of top varietals such as sauvignon blanc, pinot noir and premium chardonnay - the domestic scene continues to be dominated by $10-and-under bottled wine, a market that is increasingly supplied by large overseas producers.

New Zealand wine commands the highest average price in Britain, its largest export market, striking gold at an average of £5.50 ($19.34) a bottle compared with Australian wines - £4.60 a bottle - or the average at £4.

The combined factors of low harvests, lucrative export markets and substantial imports pitched at lower prices show no signs of abating.

Early indications suggest this year's grape yield will be down about 15 per cent on last year's 80,000 tonnes, largely because of weather extremes in the prime growing areas, including a cold snap in Hawkes Bay at the beginning of the season and drought and humidity as the summer drew to a close.

Increased foreign investment in New Zealand wineries - most recently the phased purchase of Matua Valley by Foster's Brewing Group and liquor conglomerate Allied Domecq's refusal to walk away from Montana Wines - may also intensify a drive to supplying export markets as overseas distribution routes open up.

Two of the largest remaining New Zealand-owned wineries, Babich in West Auckland and Villa Maria in Mangere, have vowed to fight cut-price competition from overseas, especially Australia.

David Babich, the new assistant general manager at Babich Wines and the first third-generation Babich to be involved in managing the business, predicts the domestic climate could lead to local wines becoming more expensive and difficult to buy.

It is a situation mirrored in the meat industry, he notes, with international margins dictating local prices.

"We're looking at a situation where some local winemakers could be forced to abandon the local scene for export markets, which would be a shame for the New Zealand wine consumer.

"We just can't compete on price in the lower to middle end of the market, although obviously we can more than compete on quality."

George Fistonich, Villa Maria managing director, agrees. He says imports of cut-price wine, such as Australia wine in bulk and bottles, is boosting the low to mid-price market and putting undue emphasis on lower quality.

"With the growth of large multi-national companies with unlimited promotional budgets, we have to be careful that we are not forced off the supermarket and wine-shop shelves by foreign companies seducing the wine buyers and buying shelf space with big dollars," he says.

Wine Institute statistics show imports have surged from 8 million litres in 1990 to almost 29 million litres last year.

Yet over the decade, consumption per head declined from 11.7 litres in 1990 to 10.3 litres last year.

But imported bottled wine has shrunk from a peak in 1999, says institute chief executive Philip Gregan.

Most of the wine now imported into New Zealand is bulk wine used to top up production that has fallen short because of substandard harvests, he says.

"There is no doubt that imported products have a huge place in the domestic scene, but if you look at the figures, bottled product is down, bulk is up - and that really is linked to each year's vintage."

While the "under $10 a bottle" is the fastest-growing wine category, attributable to both strong imports and sales through supermarkets, Mr Gregan says New Zealand wineries can be competitive in the $10 to $15 range.

Both Babich and Villa Maria say they are keen to increase their exports as production expands, but view a strong domestic base as a business basic.

Mr Babich says as a substantial number of wine drinkers trade up, local wineries will be better able to cash in on the local market.

"We are passionate about this market, and intend to put more resources into servicing it.

"We've phased out our sub-$10 bottles, and feel convinced that consumers who value quality will still choose our wine."

Mr Fistonich says the New Zealand consumer and retailer should become a little more parochial about the local industry.

"The important issue for the ... industry is to communicate the indisputable fact that [it] has an exceptionally high percentage of high-quality wine.

"This is quite unusual, as many wine-producing countries have a very small percentage of high-quality wine and large percentages of very ordinary, and in some cases, substandard wine.

"For the consumer looking for quality wine, the degree of risk is far greater when buying foreign wine."