The outlook for New Zealand’s wine industry is bright, following a momentous 12 months that started with an Alert Level 4 lockdown during the 2020 harvest, followed by surprisingly resilient sales and export results.
The 2020 harvest completed in the midst of a lockdown sent the New Zealand wine market into disarray, according to Mike Laven, Colliers Marlborough Director and viticulture specialist.
“The industry was expecting a worst-case scenario as the local and key overseas markets descended into lockdown, essentially removing all on-premise sales.
“The reality of the situation proved to be very different. Consumer drinking and shopping habits changed, resulting in increased purchases from supermarkets, online, and direct from suppliers for home consumption.
“Sales of New Zealand Sauvignon Blanc were particularly strong as customers found both the taste and retail price point irresistible.”
New Zealand Winegrowers reported that total wine exports surpassed $2billion in 2020, an increase of 8 per cent from 2019.
Growth was particularly solid in the three largest offshore markets, the US, UK, and Australia, which collectively account for over 75 per cent of New Zealand wine exports.
By the end of 2020, sales in the UK had increased by 14 per cent, Australia was up by 12 per cent and our largest market, the US, was up by 6 per cent.
Andy Poswillo, Colliers Marlborough Director and viticulture specialist, says that strong retail sales are fantastic for the industry, but the year ahead will be challenging as producers try to meet increased demand in a low yielding season.
“With global demand for New Zealand wine, especially Sauvignon Blanc, at an all-time high, wine companies were hoping for a large 2021 harvest to meet the growing supply demands of their hard-won customers around the world.
“Unfortunately, the Marlborough 2021 vintage was significantly impacted by early season frosts and inclement weather during flowering, resulting in a lower production year.
“While the conditions ensued exceptional wine quality, production is estimated to be down by 30 per cent from the 2020 harvest.”
“Pruning has now begun on the Marlborough region’s 28,000 hectares of vines, enabled by an influx of some 2,500 seasonal workers arriving through the Recognised Seasonal Employer (RSE) scheme.
“At the same time companies are working to manage expectations as stocks run low of 2020 wine and buyers lobby strongly for their allocation of the limited 2021 supply.
“To keep up with product demand, many producers are looking to secure additional long-term supply through new grape supply contracts, leases or property purchases.”
Laven agrees, noting that robust wine sales have culminated in demand for vineyards, which is outstripping supply and driving up property values.
“After a slow period during 2018 and 2019, a flourishing sales market has flowed into the property sector with vineyard sales bursting into life.
“Recent property sales have ranged from $150,000 to $320,000 per canopy hectare depending on the location, variety and yield history.
“One example is the sale of Maven Vineyard in Rapaura. This high-quality property was sold by Colliers in August for $25 million after a competitive process resulted in multiple offers.
“In addition to established wine companies seeking vineyards to increase their grape supply, we are seeing strong interest from institutional investors looking to purchase on a sale and leaseback arrangement or long-term supply agreement.
“With low deposit rates, record-low interest rates and what is looking like another stellar run for New Zealand wine, investment in viticulture property is shaping up to be an attractive option.”