As a high dollar and worldwide economic weakness batter both
New Zealand's primary industries and manufacturing, it is
worth noting positive signals.
One such bright light appears to be the long-suffering wine
industry. It, according to New Zealand Winegrowers chief
executive Philip Gregan, is seeing "signs of a new optimism
emerging" after enduring hard times since 2008.
An annual financial benchmarking survey, released last week
by Deloitte and New Zealand Winegrowers, shows all but the
largest wineries improved profitability during the past
financial year compared with the previous year.
Deloitte partner Paul Munro, while being pleased to see the
survey results continue to support the signs of a turnaround
in the industry, cautioned there was still some way to go
before financial returns were appropriate to the capital
invested. Nevertheless, helped by a smaller grape harvest and
a better balance between supply and demand, exports are worth
more than $1.2 billion, well over 50% of total sales.
And many vineyards made reasonable profits. Mr Munro made the
point that the sector needed to focus on growth in value,
rather than volume. This has long been the message. Little
New Zealand can never compete on scale with Australia,
California or Chile. Its relatively high costs, its distance
from markets and its small operations mean this country must
compete at the upper end of the market.
This fact of business is especially stark in Central Otago,
where boutique vineyards abound.
Many, even with a quality product, lose money because of high
fundamental costs, starting with the land itself. Many, even
when they win awards, can fail at the distribution and
Some are kept afloat because the owners have other incomes
and are willing to subsidise what can be, in effect, an
There is, however, scope for smart and classy enterprises to
do reasonably well, especially because conditions in Central
- and the Waitaki Valley - provide the potential for
top-of-the-range wine. An example is a 2010 pinot noir from
Central's Grasshopper Rock vineyard which has just won the
Air New Zealand Champion of Show trophy, considered by many
in the wine industry to be the top national award.
Growers, distributors and marketers, either in New Zealand or
overseas, have to target the upper middle and upper classes,
those with disposable income willing to spend far more than
the under-$20-a-bottle clientele. Anything less and small
vineyards will simply go under, the fate of some recently in
Otago and more could easily follow.
Interestingly, more and more of those likely to buy quality
will be across new wine frontiers. A Rabobank researcher, for
example, has identified Mexico, Brazil, Poland and Nigeria as
"hidden gems" where new markets can be found, especially as
sales mature or decline in traditional markets.
Venturing into such places will clearly be beyond most small
growers and wine makers. But the larger companies and
combined operations can make progress. In every instance,
building and maintaining a name for quality will be
essential, as the Swiss have for watches or the Belgians for
The wine industry has come a long way in past decades as
growing and winemaking standards have improved and as grape
varieties to meet both the market and local conditions are
emphasised and as individual localities with individual
characteristics have come to the fore.
In 1981, when areas like Marlborough and the East Coast of
the North Island already harvested substantial grape
quantities, only 2% was exported. This rose to 12% 10 years
later, 35% in 2001 and 70% last year. At the same time,
diversification has taken place, although Britain is still
the No 1 export market.
New Zealand wine can both add to and feed off what must be
this country's future in high-quality and niche markets. This
is an approach and strategy also being recognised more and
more by other primary producers.
Fine wool can be woven into prestigious and expensive
garments and lamb can be the dish of the wealthy and for
special occasions. A meal of New Zealand lamb accompanied by
New Zealand pinot must resonate distinction and