New Zealand’s winemakers have enjoyed a $1.9 billion bumper year on the export markets, but now it’s the end of the golden weather.
At Trader Joe’s flagship wine store in New York’s Union Square, queues of shoppers stretched along East 14th St during the early months of 2021.
With restaurants closed to indoor dining, Manhattanites would often wait 30 minutes in the sub-zero temperatures during the depth of the Covid winter, eager to restock their depleted wine racks.
Once inside, the popular US supermarket chain’s chatty, knowledgeable staff were happy to share their thoughts on the Oyster Bay and Kim Crawford Sauvignon Blancs displayed prominently on their shelves.
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New Zealand’s wine industry proved remarkably resilient during the coronavirus pandemic, with export revenue increasing 0.6% to $1.9 billion in the year to June 2021, according to a new report from the Ministry for Primary Industries.
A bumper 2020 crop, much of it harvested while New Zealand was in level 4 lockdown, saw export earnings rise in spite of the myriad challenges presented by Covid, not least transporting wines to the key markets of North America, Europe and Australia.
Another reason the industry was able to weather Covid, MPI says, was due to the majority of Kiwi wine exports being sold in supermarkets and bottle shops, rather than restaurants and bars.
‘In many markets, New Zealand wine tends to be sold in off-license premises rather than in restaurants, so marketing channels were not disrupted as much as they could have been,’ the ministry’s June 2021 Situation and Outlook for Primary Industries states.
However, the rosé-tinted glasses are coming off. This year’s harvest is down 19 percent on the previous year, impacted by cooler weather in September and October, late frosts in Nelson and elsewhere, as well as increasing production costs and labour shortages.
Last week the New Zealand Winegrowers industry body warned of “supply and demand tension” due to the harvest shortfall, which they estimate will be about nine million cases of wine lower than last year.
“While the quality is exceptional, the overall smaller harvest means many of our wineries will face tough decisions over who they can supply in their key markets,” Philip Gregan, CEO of New Zealand Winegrowers, said.
Invivo Wines co-founder Tim Lightbourne told Newsroom their harvest was down by between 20 and 30 percent, and they’ll struggle to fill orders with their retail customers in the Northern Hemisphere.
The Te Kauwhata-based winemakers have partnerships with Graham Norton and Sarah Jessica Parker, and Lightbourne says the celebrity connections have helped lift sales on both sides of the Atlantic.
“We had huge uplifts in sales so we’ve had to speak to retailers in key markets including Ireland, the United Kingdom and the US to manage volumes, so we don’t sell out before 2022.”
Lightbourne says the first bottles from this year’s crop will start arriving to the international market in September.
But whereas cases used to take about eight weeks to ship, the global supply chain hangover from Covid and the Suez Canal blockage meant it could take double that length of time.
It’s a problem when you’re trying to time promotional campaigns around the new Sex and the City reboot, which has just begun filming in New York.
“Things are moving but it’s just people can’t rely on something arriving in time for a big promotion or a big campaign that you’re doing as smoothly as it once was.”
Export figures from Winemaker NZ’s annual report show of the 82.6 million litres of wine New Zealand sent to the United States in 2020, 80 million litres was white wine. Nearly nine out of every ten bottles sent offshore are Sauvignon Blanc.
The wine industry, now the country’s sixth largest export product, rode a wave of positive coverage as New Zealand successfully eradicated Covid-19.
In a glowing write-up in The Wall Street Journal in April, wine columnist Lettie Teague said the Kiwi Sauvignon Blancs were a reflection of the country where they were made.
‘Even in a year such as 2020, both the country and the wines managed to triumph. New Zealand was almost Covid-free and the vintage was one of the best in recent history.’
Lightbourne agrees the gushing media coverage had a positive impact on sales.
“Just being high profile with how we dealt last year with Covid, the amount of media that the country was getting, NZ was quite a popular place.
“Customers all round the world, (from) the Netherlands, Bulgaria and even the United States, they were seeing New Zealand on their mainstream news.”
MPI says over the next year, the smaller 2021 vintage is expected to push export volumes 15 percent lower.
But beyond 2022, “the wine industry is expected to recover and resume growing, with export revenue forecast to approach $2 billion by 2025”.
Nearly a third of New Zealand’s wine exports go to the United States, making it especially sensitive to the high Kiwi dollar.
Apart from a dip in January, the New Zealand dollar has remained stubbornly above US70 cents since November.
At Trader Joe’s, a bottle of Oyster Bay Sauvignon Blanc retails for USD $13.99, which would be about $20 at the current exchange rate.
By comparison, you can pick up a bottle of Oyster Bay Sav at Countdown this week for $17.99.
Strong demand in the domestic market is also helping to prop up the wine industry.
According to MPI, domestic wine consumption was up nearly 5 percent in the year ended December 2020 over the previous year, with approximately half of this consumption being New Zealand wine.
However, excise rates on domestic wine sales is expected to increase by 1.5% on July 1, making export markets even more attractive.
New Zealand Winegrowers’ Philip Gregan said the strong export performance reinforced the industry’s reputation for “distinct, premium, and sustainable wines”.