New Zealand’s unique climate for grape growing meant it was once seen as the ‘France of the Southern Hemisphere’. Now, it’s a case of survival of the fittest.
Those were the days. Kiwis, an increasingly worldly-wise bunch after several decades of post-war travel to Europe, were finally getting over their obsession with beer and embarking on a new love affair – with wine. From Northland to Central Otago, baby boomers rushed to buy land, plant grapevines and launch their own boutique wine labels.
That was in the 1990s, the golden era of New Zealand wine. Today, it’s survival of the fittest. For many who plunged into the industry 20 or 30 years ago, their dream is in tatters. Sure, they are now in their 60s or 70s, but many younger people don’t want their wine. Not just their wine – any wine.
The severity of the challenge facing our 739 wine producers is underlined by the 2024 annual report of industry body, New Zealand Winegrowers. Over the past decade, our annual consumption per capita of all wine (local and imported) shrank from 21.2 litres in 2015 to 14.9 litres last year. Even more dramatically, consumption per capita of domestically produced wine has almost halved –from 13.7 litres to 7.5 litres.
Viticultural contractors in our region are telling people to drop the fruit to the ground.
In the 90s, our cool climate for viticulture was seen as a gift of nature that would enable the country to emerge as a prestigious wine producer, a sort of “France of the Southern Hemisphere”. Today, many winegrowers worry we are perceived internationally as simply a spring of punchy, affordable sauvignon blancs, exported increasingly in bulk containers and sold under supermarket brands you and I have never heard of.
“There’s never been a tougher time to be in the wine business,” reports a highly regarded producer in Central Otago. “Everyone has excess inventory and cashflows are very tight. There’s no market to sell any excess grapes, which is the way some producers fund some cashflow. Viticultural contractors in our region are telling people to drop the fruit to the ground.”
Rather than a nationwide industry, with distinct regional wine styles reflecting their varying soils and climates, today’s wine production is dominated by a single region: Marlborough. New Zealand’s total area of producing vineyards has climbed by 20% over the past decade, but plantings have contracted in Nelson, Hawke’s Bay – the second-largest region – Gisborne, and Auckland, NZ Winegrowers says.
Only Marlborough has experienced a significant expansion, up by 30%. More than 70% of the country’s vineyard area is now clustered in Marlborough.
Good, but not great
A similar story emerges in terms of the varieties grown around the country. Rather than celebrating the diversity of classic grapes that thrive in different regions (merlot and chardonnay in Hawke’s Bay, riesling in Waipara, pinot noir in Wairarapa and Central Otago), our wine output is dominated by sauvignon blanc, traditionally regarded in Europe as a variety that yields wines of very good but not great quality.
During the past decade, our sauvignon blanc plantings have surged by 37% and pinot gris by 15%, but pinot noir plantings have virtually plateaued. The areas devoted to such prestigious varieties as merlot, cabernet sauvignon, syrah and riesling have all dropped – even (ye gods!) chardonnay, the greatest of all varieties for making dry white wines.
Of all the world’s significant wine producers, New Zealand is the most export-focused: almost 90% of our sales are offshore. But that wine is increasingly being shipped in bulk containers rather than bottles.
Of our $2.05 billion worth of wine exports in the year ended November 2024, 95% by volume was white wine, almost all of it sauvignon blanc. Red wine represented 5% (so much for the idea that our pinot noirs would mount a serious challenge to Burgundy).
Of all the world’s significant wine producers, New Zealand is the most export-focused.
And, for the first time, wine packaged in bottles represented under half (49.8%) of total export volumes. Shipping wine in bulk (in containers with giant polythene bags inside) is cost effective and reduces environmental emissions. The counter argument is that quality and authenticity are better protected by bottling wine close to its source (hence such reassuring French terms as mis en bouteille au chateau, indicating a wine was estate-grown and bottled at the property.)
But is exporting more and more of our wine eroding increasingly desired, direct relationships between producers and consumers? Jennifer Smith Maguire, a specialist in consumer culture at Sheffield Hallam University, argues “good taste” in wine today is increasingly operating “through a rejection of the mass-produced and the standardised, in favour of the small-scale, highly local and variable”.
Where does NZ Winegrowers stand in all this? “It is telling that industry concerns over the past 12 months have been dominated by very real short-term challenges,” former chair Clive Jones wrote in the 2024 annual report. “Flat or declining sales, high inventory levels, tough economic conditions, cost increases, falling global demand for wine, and supply chain destocking – these are the issues growers and wineries are worried about in New Zealand and in wine industries around the world.”
But are these challenges short-term? And what is NZ Winegrowers’ role? It lobbies on its members’ behalf, but should it also provide leadership in terms of developing a long-term, strategic industry plan?
“Cost rises have been across the board, although most galling to producers are those increases imposed by government,” notes the report. Over the past two years, the domestic excise tax levied on wine has climbed by more than 11%, reaching $3.69/litre – equal to $2.77 per bottle.
“So are we over-indexed on sauvignon blanc from Marlborough shipped in bulk by large companies with ever-declining prices?” asks a former member of NZ Winegrowers’ board. “Yes, we are. But that’s not something NZ Winegrowers can control – it has no commercial involvement in the market whatsoever.”
In other words, it is there to support the industry, not tell its members how to run their businesses. But some producers believe the industry body is undermining the majority of its members.
“If it changed its name to the Marlborough Bulk Wine Association, you would have a more accurate name as to who, and what, it mostly represents,” says a prominent pinot noir producer. “It is very focused on export volumes – and this is to the absolute detriment of premium and higher-margin, smaller producers, who battle against the growing prevalence of cheap New Zealand sauvignon blanc in global markets, which really defines the New Zealand wine brand.”
But he who pays the piper calls the tune. As one winegrower observes: “The concept of what is fair, with respect to how NZ Winegrowers spends its funds and where its focus is, depends on who is paying.”
The organisation’s operating income ($17 million in 2024) is based principally on levies on wine and grape sales. An industry source says 94% of wine levies were funded recently by the largest 9% of wine companies, leaving the multitude of small producers to fund just 6%. Most wineries are paying less than $1000 in wine levies, but 20 wineries each pay over $100,000.
Change may be on the way. Reflecting members’ concerns, a working group was set up more than two years ago to evaluate governance, funding and representation issues. After the committee completes its work this year, its recommendations will be voted on by the membership.
Low-price imports
On the domestic market, wineries are losing ground to imported wines, many of them low-priced. Over the past decade, overseas brands’ share of the total New Zealand market for wine has soared from 35% to 50%.
Remember Montana Marlborough Sauvignon Blanc, launched in 1979? Today on sale around the country at $10.99, it’s labelled Montana Sauvignon Blanc and made from grapes grown more cheaply in South Australia.
Things are especially tough for small wineries not involved in the export trade. “It’s not worth selling into the New Zealand market unless you have a sizeable component going directly to the consumer [cellar door, vineyard restaurant and winery website sales],” says one producer.
“At least there’s some margin to be made there. But selling through normal distribution channels [to a specialist distributor that then sells to stores and restaurants], it’s very hard to make enough margin to run a wine business.”
John Loughlin, co-founder of Askerne Estate, a small Hawke’s Bay producer, says production costs have soared, unlike retail prices. Askerne’s debut 1997 chardonnay was sold at $24.90; the 2023 vintage is now on the shelves at $26.90. How about selling through supermarkets? “You need industrial production systems and really low-cost viticulture and winemaking,” says Loughlin. “That’s a game for the big guys.”
Looking at its “best use of resources and how to deploy them,” Te Awanga Estate in Hawke’s Bay last year put its vineyard, restaurant and cellar door on the market. The company head, winemaker Rod McDonald, plans to produce his wines from leased vineyards and sell them overseas. “The domestic market for us, well, for everybody, is really tough at the moment.”
Pernod Ricard, the world’s second-largest wine and spirits firm, last year sold its New Zealand brands – including Brancott Estate, Stoneleigh and Church Road – to “strengthen its premiumisation strategy” (meaning to focus on aspirational, luxury wines.)
Changing trends
Underlying all these changes is an international slump in wine sales. Between 2010 and 2020, wine consumption in the EU declined by 24%. Global wine production in 2024 hit its lowest level since 1961.
What’s going on? Health-conscious consumers are driving today’s trends towards moderation and abstinence. According to the World Health Organisation, “the risks and harms associated with drinking alcohol have been systematically evaluated … there is no safe amount that does not affect health”.
More than half of Millennials (born 1981-96) and Gen Zers (born 1997-2012) in the US perceive moderate drinking – defined as one or two drinks a day – as unhealthy. These sentiments are reinforced by social media, which promotes a fanciful healthy/fit/beautiful ideal.
Consumers today are also being offered a vast array of alternative drinks – RTDs (ready-to-drink alcoholic beverages), kombuchas, zero and low-alcohol spirits, no/low-alcohol beers, cocktails – creating a sense of choice and the excitement of being able to try something new. In the US, New Zealand’s largest export market for wine, alcoholic beverages are increasingly being replaced by cannabis products.
The good news is that the quality of most New Zealand wines has never been better. Suggestions for engaging more young consumers with wine include new and different flavours, reduced and innovative packaging, and connecting on their preferred channels.
Terra Sancta Estate, at Bannockburn, in Central Otago, recently released a 2024 Blanc de Noir – white wine crafted from pinot noir grapes.
However, says proprietor Mark Weldon, wine “is a slow-growing agricultural product and a sector where the most coveted, highest value wines are highly linked to terroir and tradition. It is not a natural fit [for wine] to be a leader in the fast-moving, trend-driven markets.”
Michael Cooper ONZM has been the Listener’s wine critic for 18 years.