The Vintner’s Luck: March 07 issue

THE VINTNER’S LUCK
How NZ and Australian wines took on the world, and won
It’s not often we get a chance to celebrate international success these days, but as SELWYN PARKER in London discovered, they are seriously devouring the fruit of our vines, there:
Although it was in the depths of winter – January 15-16 to be precise, there was hardly a spare seat at Lord’s cricket ground in London. The event was under cover and it was at the famed Nursery Pavilion End of the ground. The occasion? The annual tasting of the New Zealand vintage when 120 Kiwi vignerons come over to present their creations in the world’s most important export market.

Every wine-exporting country judges its success by its performance in the British market, more specifically by percentage share and by average retail price per bottle. The tasting is both a proud showcase and a nerve-wracking examination for the New Zealand industry as buyers, wine pundits and oenophiles in general swirl, smell, see, sniff, spit and sometimes swallow their way through 600 wines.
How times have changed. Twenty-six years ago, when the British wine establishment was invited to the inaugural tasting of New Zealand wines, it was held in an upstairs room in New Zealand House. Those journalists and members of the trade who bothered to turn up only did so because they were intrigued to learn we produced something other than lamb, wool, butter, kiwifruit and All Blacks. New Zealand wine!
It was almost a contradiction in terms. In the eighties hardly anybody in Britain who wasn’t a New Zealander drank our beer (and still doesn’t), let alone our wine. “Most people came to laugh”, remembers veteran trade representative Philip Atkinson who organised it all. “I had to work extremely hard to get them there.”
The debut of New Zealand wine on the international stage could hardly be described as a glittering occasion. There were less than fifty wines on the table and they were only there by virtue of a mad dash from the airport in a Ford Cortina with a panicking Atkinson at the wheel. They had been freighted over in an RNZAF Hercules that arrived late. Knees knocking, the few New Zealand wine-growers to brave the pundits and retailers had brought over mainly whites, mostly sauvignon blanc and chardonnay, and some reds, mostly cabernet. Their anxiety was understandable. Apart from a few bottles of Cresta Dore and Bakano, labels of the sixties since mercifully buried, no New Zealand wine had ever been brought to Britain.
As it happened, it all worked out surprisingly well. As Margaret Harvey, the former Mt. Roskill girl who has helped pioneer New Zealand wine in Britain, remembers, the message was generally encouraging but blunt. “If you’re going to sell your wine here at all, it will be your whites”, the producers were told. “Your reds are yeech. Don’t show them here again”. The subsequent reviews for the whites were reasonably encouraging and the wine tastings became an annual, if minor, event on the British industry’s calendar. A stake had been put in the ground.
Wine pundits were one thing however, buyers another. Out in the boon docks of the retail trade whose shelves were stacked with European labels, it was hard going. Margaret Harvey had come to Britain as a pharmacist in 1975 but in an act of faith abandoned her profession to establish Fine Wines of New Zealand in 1985 out of her house in Camden Town at a time when the advertising authorities might have taken legal action for the first word in the company’s title. It was a one-woman operation and the owner remembers plodding around the wine clubs, pushing the New Zealand vintage night after night, often not getting home until the early hours.
Others like salesman Richard Goodman were also labouring in this stony vineyard. Representing Cooks and Montana at various times, he took on the supermarkets after the pundits told the growers: “You can’t expect us to write about your wine if we can’t tell readers where to buy it.” He and Atkinson often worked together, knocking on door after door.
“We got thrown out of a few places”, Atkinson remembers.
The message was simple: “You’ve got to stock New Zealand wine. We’ll do anything to get it on your shelves”.
And shelf by shelf, that’s what they did. The breakthrough was a supply contract with nationwide liquor retailer Threshers, which has been a friend of New Zealand wine ever since. The first supermarket to be breached was Waitrose, a chain with a reputation for fine fare, and other retailers gradually followed suit. Today the Kiwi product is found everywhere. Even Berry Bros & Rudd, purveyors of fine wines – French in particular — for 300 years, started stocking the higher-quality labels a few years back.
Meantime the product was improving all the time. At first more enthusiastic than skilful, winegrowers began to adopt more professional practices under the tutelage of experts such as Australia’s Dr. Richard Smart, a world authority on cold-climate viticulture. They were quick to learn and the result was better trellising, leaf-plucking and spraying among other improvements. In Britain this was noticed as the pundits approved of the more subtle flavours instead of the “aggressive herbaceousness” that characterized the first offerings.
As the High Street came to stock more New Zealand wine, the believers in the government trade office found extra dollars to boost sales. One of the results was the first appearance at the London Wine Trade Fair of 1986, a landmark occasion that was followed by a splendid, celebratory dinner at Methuselah’s in Victoria Street. The dinner was a far cry from the budget tasting of 1981. Instead of a mad dash in a Ford Cortina, all the food and drink as well as the chiefs were flown in by Air New Zealand. Everybody who could be there was: Morton Estate, Delegat’s, Montana among others. One of the best investments ever made for the country, let alone its wine, it woke the industry up to how far the country had come gastronomically and vinously.
“It was a tiny participation at the fair but it was a big dinner”, recalls Atkinson who organised that too. “That made the difference. Suddenly we were real.”
But sales hadn’t taken off. Even a decade ago the Brits hardly deigned to wet their lips with the New Zealand grape. In 1996 the UK grudgingly took NZ$40.6m worth of New Zealand wine, which is barely a drop in this enormous bucket, and much of that was drunk by a hard core of expats and others who had an acquaintance with New Zealand, had tasted our wines and therefore knew better.
However with the groundwork done, the momentum was with New Zealand. From having hardly a foot in the door, sales climbed – rather, rocketed – from that $40.6m to $167m in 2006, an increase of over 400 per cent. Last year overall consumption in the British market fell while the volume of New Zealand wine sold, running against the trend, picked up by four per cent. It’s been an incredible decade envied by all other wine-exporting nations.
At the same time success in the UK market spun off into sales in other markets, like a badge of approval. Last year global volumes topped the magic half billion barrier — to be precise, $512m — for the first time. With the help of British distributors, the New Zealand vintage has even cracked the notoriously protectionist European Union. The Dutch drank $10m worth last year ($1.2m ten years ago), Germany $3m (well under a million ten years ago) and Ireland, home of Guinness, over $8m (nowhere near a million). The French, of course, still hardly touch our stuff.
The original pundits were right about the whites. They quickly became the building blocks of this expansion, in particular sauvignon. But nobody ever predicted that New Zealand pinot noir, a difficult wine to produce, would excite the British palate, let alone pinot gris, syrah and the trendy viognier. Sales of pinot noir in particular, the vintage du jour, have almost doubled year on year.
Most galling for rival exporting nations, New Zealand has somehow bagged the high end of the general retail market as consumers fell in love with our diversity of wine-making styles. It became a voyage of discovery for them to sample wines produced over an enormous distance of 1600kms, spanning the latitudes of 36 – 45 degrees. As the official body New Zealand Winegrowers points out, if that 1600kms were in the northern hemisphere it would run from Bordeaux to southern Spain. This huge range of wines is one reason why New Zealand occupies a premium position in the market, one that Australian producers would very much like.
Australia sells a lot more wine into Britain than does New Zealand (over £1bn worth last year). But as one of the bibles of the market, The Drinks Business, pointed out in January, it’s the New Zealand vintage that attracts the higher margins: “Australia’s average bottle price of £4.28 is second in the UK only to New Zealand with a stellar average price of £5.93.” Nobody is exactly sure whether the average price of an Aussie bottle held its own last year, declined or edged up by two pence (as ACNielsen reckons), but it certainly hasn’t done much by comparison with New Zealand wine. In other words, if New Zealand’s wine exporters were cricketers Shane Warne would have been hit all over the park.
The overall strategy is not to let the side down by going for the quick quid. Pioneers and long-time observers of New Zealand wine’s acceptance in Britain and other exports put this down at least partly to the team spirit among producers. “They have a collaborative approach. They want to make the whole New Zealand category,” says Atkinson. He’s watched in amazement as the biggest names in our industry extol the virtues of a rival label whose owner is caught up elsewhere.
Other regions don’t always behave like this. Wine pundits still shudder over the way Californian grower Charles Shaw did nothing for the reputation of his terroir by releasing Two Buck Chuck at giveaway prices to reduce a surplus. And they’re not too sure about one of the big successes of the last two years, the French Red Bicyclette launched by the US giant E&J Gallo, because a. it isn’t French, and b. California has no special claim to cycling. As an advertisement for Californian wine, it likewise did nothing.
Although New Zealand’s prices continue to head in the right direction, even the prestige labels are a long way – perhaps half a century – behind the equivalent French ones. For example, one of the top-priced Kiwi wines at the venerable Berry Bros & Rudd is the 2004 Mountford Estate pinot noir from Waipara at £232 [$650] for a 12-bottle case in bond. Although it’s hardly comparing apples with apples with apples — or grapes with grapes — that compares with £9,900 [$27,730] for just eight bottles of the 1967 Chateau d’Yquem sauterne. At the top end, French wines still have snob value.
ACROSS the Channel the attitude of old world producers towards our parvenu wine region remained one of rock-solid superiority throughout most of the nineties. This is understandable because they do, after all, have history on their side. “My family has been tending the vines here for 15 generations”, Monsieur Thomann, a vigneron in the tiny Alsatian village of Ammerschwihr in France, told me a few years ago when I was researching a book there. He said it in a matter-of-fact way but I worked out later that his forebears must have tended the grape in that very village from the 1550s.
He showed off his cellars with their cobwebbed, oval barrels that had survived the bombs and shells of two world wars that had almost destroyed the village and he plied me with books about wine — its spirituality, mysticism, romance and general place in the history of Alsace and France. Monsieur Thomann was much less interested in the technicalities of viticulture than in the tradition. For him wine-making was almost a branch of the priesthood.
The way he went about his business illustrates the enormous gulf between old and new world producers such as New Zealand. M. Thomann had never considered exporting. “Why should I when I sell everything I produce here?” he asked.
He ran a degustation vente business – selling straight from the cellar. Connoisseurs simply walked in off the street, some having driven hundreds of miles from Belgium, Germany or Switzerland. They pressed a buzzer and sat down for a taste (degustation) and a chat with the man himself about the grape and the wine world in general (his son was the sommelier to the president of France). Thereupon he made his sale (vente), generally by the case load.
But now it’s all changed. New Zealand in common with other new world producers have become officially a threat, New Zealand more for what it represents than for how much it sells. “In this high-growth sector, where wine tends to become an increasingly industrialized and technological product, the dynamics unquestionably favour New World producers,” an authority wrote in French in a landmark article last year in the magazine L’Expansion. “By that I mean North and South America, South Africa, Australia and New Zealand”. While the “old continent” still dominates the market on the basis of claiming three quarters of total production, “its pedestal was breaking up.”
The statistics illustrate what the writer, a student of global wine markets, means. By the end of the eighties, Europe could still claim 96 per cent of all exports and was absolutely top of the heap. Now it’s down to 84 per cent and, if exports between EU countries are excluded, the losses are much more spectacular. That puts the old continent’s share of global markets at 66 per cent. In short, although New Zealand winegrowers can claim only some of the credit, a complacent Europe has been comprehensively thrashed in the higher-margin, British market where in 2005 new world wine sales exceeded those of the old continent for the first time.
That also happened to be the first year New Zealand sold more wine overseas than at home, an alarming fact duly recorded in France too. Producers there cannot believe that New Zealand not only made all that wine but sold it all as well. “Between 2004 and 2005, exports of New Zealand wine went from 31m litres to 51.4m litres, an increase of 60 per cent!” noted Viti-Net, an influential French wine industry website, in mid-2006. It added that the Kiwis vignerons are “focused on quality and the price of their wines is relatively high”.
Despite the stratospheric prices fetched by labels such as Chateau d’Yquem, that’s exactly what the French and Europeans have not been doing. As the EU’s agriculture czarina, Mariann Fischer-Boel, points out, the vineyards are churning out vin ordinaire. “We spend far too much money disposing of surpluses instead of building our quality and competitiveness”, she warned in mid-2006. Consumption was down, new world exports were making “huge inroads” and Europe was “producing too much wine for which there is no market”.
The result of these massive surpluses is that a lot of wine in France is subsidized and practically given away. At a supermarket it’s quite possible to buy a bottle of excellent local wine in Provence for a few dollars. And the wine that is not sold at all is distilled on payment of still further subsidies into something else. The whole system is blatantly protectionist and unfair to exporting nations like New Zealand, and it’s been going on for a long time.
Consider these amazing numbers. Well over 400m euros [$740m] has been spent on the “restructuring programme” for each of the last six years, but without much restructuring being done. In 2005 alone, 790m euros [$1.46bn] was spent on various “market intervention” measures that included subsidies for public and private storage, plus another 31m euros [$57m] for “grubbing-up” useless vineyards. (And still New Zealand beat the Europeans in the British market!)
The last figure says a lot. Although there have long been generous incentives to grub up loss-making vines, producers have shown a declining interest in doing so while pocketing all kinds of subsidies for making unsaleable wine. Back in 1993 for example, the EU spent 400m euros [$739m] on grubbing up, nearly thirteen times more than now.
And it’s going to get worse. In normal times Fischer-Boel, who is trying to reform all this, disposes of a budget of nearly 1.3bn euros [$2.2bn] a year purely to shore up European wine producers. France, whose vineyards account for 30 per cent of the EU total, collects the lion’s share of that. But any day now the czarina will announce new proposals offering even more generous encouragement to reform this deeply discriminatory system. The new plan is to reactivate the moribund grubbing-up scheme. This time there will be 2.4bn euros [$4.43bn] to flatten up to 400,000 hectares. Cynics of EU agricultural reforms may note that 400,000 hectares is not a lot of vineyard out of a total 3.4m hectares devoted to the grape. Moreover the grubbing-up is voluntary.
“This is a great opportunity to put the EU wine sector back at the top where it belongs,” hopes Mrs. Fischer-Boel. “We must not waste it”.
On past performance however, they probably will.
SO WHERE does New Zealand wine go from here? The British market can only get tougher, especially for the newer and smaller vineyards. The biggest supermarket chain, Tesco, is reportedly dropping ten per cent of its wine list from its shelves. Even to get onto a major chain’s shelves at all can require up-front payments of £50,000 [$140,000], which clearly favours the corporate vineyards. As Margaret Harvey says, “it’s one thing to make wine, another to sell it.”
And Europe is fighting back. French producers are developing their own labels instead just supplying others while relaxing restrictive labeling and other regulations. Italy has mounted a campaign to re-launch in Britain. Other regions are following suit – South Africa has managed to hike its margins in Britain and Australia is belatedly dealing with the surplus that has led to sales of low-cost, bulk wine.
There are risks to New Zealand vineyards. For example, at around $5m a year the R&D budget is pathetic by European standards. And now that Kiwi labels have got above the parapet, they could get shot at. New Zealand Winegrowers is concerned that some markets could play rough by introducing protection by another name, for instance by insisting on zero residues.
But that could also point the way forward in a market that’s turning greener by the month. British consumers have started to agitate for sustainability – the “carbon-free footprint” – in their food and drink. According to veterans of the market like Margaret Harvey, who is the only New Zealand-born woman to hold the Master of Wine qualification, sustainably produced wine would certainly make it easier to sell in Britain and beyond. “It’s very exciting,” she enthused. “Everybody should be on the sustainability programme if we want to keep commanding those high prices.”
That would certainly give Kiwi wine an edge that matches its image, similar to the one Australia had a decade or so ago. Over here New Zealand wine is regarded as new and exciting, the product of young and enthusiastic, even iconoclastic, vignerons who dare to play the game differently.
Like the All Blacks, you could say.