New Zealanders love to have a drink, but that doesn’t mean all is well in the business of booze.
In recent years, we’ve seen iconic local beer and wine brands fall on hard times and struggle to keep trading.
Michael Donaldson, the publisher of the Pursuit of Hoppiness craft beer magazine, tells The Front Page podcast there has been a big shift in what craft beer actually represents in the country market.
“Craft has turned from being a revolutionary subculture around 10 years ago to now becoming mainstream,” Donaldson says.
“The market share is up around 20 per cent and that means those kinds of beers are reaching more people.”
While there was rapid growth for some time, he says the market has now matured and now plateaued.
“We’re seeing a few smaller breweries being picked off in what you would call market churn. Not everyone’s going to survive in this current environment where we’ve got increased prices and people have less money in their pockets.”
As a market matures, one would always expect smaller firms with smaller margins to eventually close down, but we’ve also seen some big names collapse. Brothers Beer is among those recently placed into voluntary administration after 10 years in operation.
“Without knowing exactly how their business model worked, it looks to me like they tried to grow a national brand while still running their half dozen local pubs.”
Other brands, including Good George and Sprig + Fern from Nelson, have done this successfully, but it isn’t an easy balance to strike.
“Brothers invested heavily in trying to get to that place. They hired sales staff, they were running these half dozen pubs, some of which opened quite recently, and I just don’t think they got to where they needed to be quickly enough.”
The other challenge facing the craft beer sector is that major alcohol companies are also tapping into this trend by creating brands that look and feel very much like craft products.
“I was talking to a brewer recently and he said: ‘It’s all just beer now.’ The problem with craft is it’s always been ill-defined. Does it mean small scale? Does it mean independent? Does it mean flavoursome?”
Without that clear definition, the territory was ripe for major beer companies to step into – and all the big breweries have done exactly that.
“You now have Lion with their Mac’s brand, DB with Monteith’s and Asahi with Boundary Road. Those are the three main ones in that area, and what they’re doing is just pumping up the flavour in those brands. They’re making great beer at a more affordable price.”
Donaldson remains hopeful about the sector, saying that 20 per cent of the market is still a significant share to target – which is to say we will likely see some more interesting experiments in the future.
This story isn’t only about beer.
Major wine brands, including Sacred Hill and Villa Maria, have also seen their legacies unravel amid deep financial struggles.
To help us understand what’s gone wrong for these iconic wine brands, the Front Page was also joined by BusinessDesk senior journalist Paul McBeth.
McBeth says that arguably the most surprising fall from grace was Villa Maria because of its integral role in establishing the local wine scene.
“Sir George Fistonich was very much the founding father of New Zealand’s winemaking,” he says.
“He was right there at the beginning and really brought it into the national consciousness.”
McBeth says moving on from that legacy proved the eventual undoing of the brand.
“In the case of Villa Maria, the business itself was fine. They were looking for capital, trying to work out whether or not to bring on a new partner or sell things. And ultimately, it was the parent company that went into receivership rather than Villa Maria.”
McBeth says succession is always tricky when you’ve got such a strong founder involved in everything.
The other big recent wine collapse, Sacred Hill, came down to the company’s ambition.
“Sacred Hill fell into the classic trap of not just winemaking, but New Zealand business. It took on too much debt and didn’t work out how to get the money coming in the door. And when the bankers came calling, they had to sort of shut up shop and sell the assets.”
Despite these struggles, McBeth says there are still many interesting wine brands around New Zealand finding unique ways to tap into the giant international market. He says while there have been some struggles, he remains optimistic New Zealand wine will remain on tables around the world.
For more on the wine and beer sectors in New Zealand, listen to the full episode of The Front Page podcast.
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am. It is presented by Damien Venuto, an Auckland-based journalist with a background in business reporting who joined the Herald in 2017.