Viticulture
This commentary relates to viticulture throughout New Zealand, the 2001 vintage, and issues facing the industry.
Key Points
- Wine exports exceeded $200 million for the first time, which continues the trend of recent years and has seen exports double in value since 1998.
- Spring frosts, wet weather at ripening and drought combined to reduce the national harvest to an estimated 71,000 tonnes, compared with 80,100 tonnes last season.
- Rapid expansion of the industry continues with 10,197 ha of the producing vineyard in the year 2000 predicted to expand to 13,637 ha by 2003.
- Further restructuring of the industry has occurred with the integration of the two largest New Zealand wine companies and the acquisition of two other wineries by Australian wine companies.
- A possible merger of the two major grape organisations - the Wine Institute of New Zealand (Inc) (Wine Institute) and the New Zealand Grape Growers Council (Inc) (NZGGC) - is imminent.
- The industry actively promotes a green image through the Integrated Winegrape Production Scheme (IWPS).
Physical Factors
Climate
The 2000/01 season was marked by climate extremes which affected North Island vineyard regions in particular.
In November, Hawke's Bay and Te Kauwhata experienced two ground and air frost events. The latter seriously affected some growers. The pattern of damage of the second frost was random - one vineyard was completely damaged, while neighbouring properties were only lightly affected or completely unaffected. For those vineyards seriously affected it led to yield reductions of 50% or more, some with a complete loss of crop. The on-going effects will not be known until next spring, but return growth has generally been healthy.
Cool spring temperatures at flowering also affected yields on most varieties in Hawke's Bay, Gisborne, and Auckland to Northland. This led to significantly lower yields than estimated and up to 50% less depending on variety.
Late summer rains and high humidity at ripening further compounded the earlier cool temperature problems in Gisborne and parts of Northland to Auckland. This led to earlier ripening varieties, such as Chardonnay, being harvested much earlier than expected, due to rot.
Near record drought conditions in Wairarapa, Nelson, Marlborough and Canterbury led to irrigation water shortages on some vineyards. This has resulted in growers becoming more aware of the need for more accurate monitoring and irrigation scheduling. However, overall grape quality and yield was not seriously affected and wine quality is expected to be high.
| Table 1: New Zealand Vintages (tonnes) | |||||
| 1996 | 1997 | 1998 | 1999 | 2000 | |
| Grape Variety | |||||
| Muller Thurgau | 13,838 | 9,739 | 10,579 | 8,941 | 6,353 |
| Chardonnay | 13,870 | 12,683 | 18,169 | 17,823 | 23,593 |
| Sauvignon Blanc | 12,354 | 11,511 | 15,136 | 20,580 | 15,472 |
| Chenin Blanc | 2,609 | 2,255 | 2,766 | 2,099 | 1,992 |
| Gewürztraminer | 732 | 510 | 937 | 493 | 594 |
| Riesling | 2,877 | 2,471 | 3,400 | 3,462 | 4,070 |
| Muscat Varieties | 5,028 | 3,753 | 4,448 | 3,885 | 3,487 |
| Semillon | 2,342 | 1,944 | 2,319 | 2,593 | 2,189 |
| Reichenstenier | 1,813 | 991 | 1,693 | 1,407 | 1,185 |
| Pinot Gris | n/a | 149 | 257 | 411 | 572 |
| Other White Vinifera | 3,843 | 2,410 | 2,313 | 1,912 | 939 |
| Cabernet Sauvignon | 4,159 | 2,824 | 4,220 | 3,723 | 3,792 |
| Pinot Noir | 4,617 | 3,427 | 4,489 | 4,844 | 6,319 |
| Pinotage | 949 | 504 | 887 | 444 | 868 |
| Merlot | 2,857 | 2,036 | 3,430 | 3,252 | 4,090 |
| Cabernet Franc | 611 | 534 | 710 | 618 | 702 |
| Syrah | n/a | 69 | 203 | 192 | 257 |
| Malbec | n/a | 63 | 159 | 214 | 363 |
| Other Red Vinifera | 599 | 260 | 328 | 291 | 400 |
| All Hybrids | 232 | 173 | 91 | 116 | 20 |
| Total | 73,340 | 58,036 | 76,536 | 77,300 | 78,069 |
| Industry Total* | 75,300 | 60,000 | 78,300 | 79,700 | 80,100 |
| Region | |||||
| Northland | 57 | 32 | 106 | 55 | 105 |
| Auckland | 1,553 | 1,092 | 869 | 1,224 | 1,363 |
| Waikato/Bay of Plenty | 781 | 526 | 334 | 552 | 637 |
| Gisborne | 22,330 | 18,172 | 23,649 | 22,133 | 21,820 |
| Hawke's Bay | 21,172 | 16,533 | 22,751 | 19,472 | 23,886 |
| Wellington | 1,072 | 786 | 804 | 607 | 1,124 |
| Marlborough | 24,192 | 19,585 | 25,558 | 29,229 | 26,212 |
| Nelson | 761 | 838 | 898 | 1,383 | 1,125 |
| Canterbury | 1,059 | 512 | 960 | 1,551 | 788 |
| Otago | 376 | 230 | 605 | 1,094 | 1,009 |
| Other | 7 | 0 | 0 | 0 | 0 |
| Total | 73,340 | 58,036 | 76,536 | 77,300 | 78,069 |
| Industry Total* | 75,300 | 60,000 | 78,300 | 79,700 | 80,100 |
| Source: Wine Institute of New Zealand Annual Vintage Surveys | |||||
| * The data shown is the results from the Wine Institute of New Zealand's Annual Vintage Surveys, whereas "Industry Total" represents the tonnes crushed by the total wine industry. The difference between "Total" and "Industry Total" is data from wine companies that did not respond to the Vintage Survey. | |||||
Production
The very rapid growth in plantings of grapevines continues all over the country (see Table 2).
Figures for the national grape intake for the 2001 season were still not available at the time of printing. It is now estimated that the harvest was 71,000 tonnes. This is much lower than earlier predictions after the adverse weather events that occurred in Hawke's Bay and Gisborne. Major shortfalls in those regions were compensated to some extent by the increased production from new plantings. Good yields were achieved despite drought conditions in the South Island. This is the second year in a row that weather conditions have limited the predicted grape intake.
| Table 2: New Zealand Producing Vineyard Area (ha) | ||||||
| 1998 | 1999 | 2000 | 2001* | 2002* | 2003* | |
| Grape Variety | ||||||
| Muller Thurgau | 537 | 520 | 430 | 379 | 351 | 311 |
| Chardonnay | 2,006 | 2,449 | 2,858 | 3,312 | 3,522 | 3,617 |
| Sauvignon Blanc | 1,678 | 2,008 | 2,485 | 2,572 | 3,165 | 3,515 |
| Chenin Blanc | 139 | 154 | 150 | 137 | 143 | 156 |
| Gewürztraminer | 85 | 103 | 145 | 144 | 163 | 168 |
| Riesling | 343 | 432 | 503 | 529 | 600 | 607 |
| Muscat Varieties | 177 | 191 | 188 | 141 | 129 | 126 |
| Semillon | 232 | 215 | 235 | 243 | 254 | 257 |
| Reichenstenier | 74 | 65 | 64 | 59 | 62 | 55 |
| Pinot Gris | 61 | 90 | 130 | 164 | 225 | 255 |
| Cabernet Sauvignon | 555 | 653 | 671 | 690 | 746 | 733 |
| Pinot Noir | 596 | 826 | 1,126 | 1,427 | 1,760 | 2,088 |
| Pinotage | 64 | 85 | 75 | 77 | 85 | 84 |
| Merlot | 405 | 535 | 674 | 861 | 985 | 974 |
| Cabernet Franc | 88 | 111 | 121 | 145 | 160 | 165 |
| Syrah | 40 | 51 | 62 | 75 | 104 | 109 |
| Malbec | 25 | 49 | 69 | 92 | 113 | 149 |
| Other and Unknown | 475 | 483 | 211 | 228 | 255 | 268 |
| Total | 7,580 | 9,000 | 10,197 | 11,275 | 12,822 | 13,637 |
| Region | ||||||
| Auckland | 321 | 345 | 393 | 409 | 457 | 455 |
| Waikato/Bay of Plenty | 100 | 100 | 119 | 126 | 136 | 131 |
| Gisborne | 1,424 | 1,447 | 1,681 | 1,848 | 1,963 | 2,003 |
| Hawke's Bay | 1829 | 2336 | 2443 | 2800 | 3072 | 3074 |
| Wellington | 212 | 281 | 327 | 363 | 430 | 534 |
| Marlborough | 2,747 | 3,477 | 4,054 | 4,354 | 5,228 | 5,757 |
| Nelson | 161 | 175 | 203 | 256 | 297 | 335 |
| Canterbury | 350 | 363 | 442 | 485 | 485 | 522 |
| Otago | 210 | 207 | 280 | 352 | 433 | 485 |
| Other and Unknown | 226 | 269 | 255 | 282 | 321 | 341 |
| Total | 7,580 | 9,000 | 10,197 | 11,275 | 12,822 | 13,637 |
Source: Wine Growers of New Zealand Vineyard Surveys |
||||||
| * Forward estimate, assumes 2000 Vineyard Survey represents 97.5% of the vineyard area. | ||||||
Crops of Chardonnay, Pinot Noir and Merlot reached all time highs in the year 2000, and Sauvignon Blanc will also feature highly in future vintages based on the planting statistics. Notable also, is the rapid decline in bulk varieties, such as Muller Thurgau, as the industry increasingly focuses on production of premium wine varieties.
The origin of the grape supply from contract growers versus winery owned vineyards is rapidly changing. Bulk varieties such as Muller Thurgau and Chenin Blanc are now almost entirely produced by contract growers. Around 50-60% of the premium white varieties - Chardonnay, Sauvignon Blanc, Riesling and Pinot Gris - are also produced by contract growers. On the other hand, premium red varieties, including Pinot Noir, Merlot and other Bordeaux varieties, are mainly produced from winery operated vineyards. However, contract growers still produced most of all the grapes harvested in the 2000 vintage. Overall, this is more than 60% of the national vintage.
Very rapid growth in plantings continues, which has lead to continuing shortages of nursery stock and waiting lists of up to two years. The total producing area in the year 2000 was 10,197 ha and it is predicted this will climb to 13,637 ha by 2003. Marlborough dominates the plantings with 40% of the area in the year 2000 followed by Hawke's Bay (24%) and Gisborne (16%). Projections to 2003 suggest that Marlborough will increase its domination of the planted area in vines to 42%, and Hawke's Bay and Gisborne will decline slightly to 23% and 15% of the national total respectively.
The variety composition of the national vineyard is dominated by white wine varieties, which account for 70% of the total plantings. Dominating the white wine varieties planted is Chardonnay with 40% (39% in 1999) and Sauvignon Blanc with 35% (32% in 1999). It is projected that a further 759 ha of Chardonnay will be producing in 2003 while Sauvignon Blanc is expected to increase by 1,030 ha. In the next three years it is anticipated that plantings of Pinot Gris will almost double to 255 ha. Riesling will still rank number three of the white varieties with 607 ha (or 7% of the total white production). Muller Thurgau is expected to drop from 430 ha to 311 ha, a reduction of 28% and reducing to 3.4% of total white production by 2003.
Red wine varieties are rapidly growing in importance, led by Pinot Noir (1,126 ha), Merlot (674 ha) and Cabernet Sauvignon (671 ha). Pinot Noir shows the greatest increase in area (300 ha) in 2000. Pinot Noir's growth is expected to continue with predictions of increases to 1,760 ha by 2002 and 2,088 ha by 2003, demonstrating the continued focus on this variety. Merlot has increased from 535 ha in 1999 to 674 ha in 2000 (up 26%), and is expected to increase in producing area to 974 ha in 2003. The Cabernet Sauvignon area has remained about the same as 1999 but indications are that the area will increase to 733 ha by 2003.
Pinot Noir is growing most rapidly in South Island regions. Marlborough produces 70% of the national area of Sauvignon Blanc and is expected to continue to increase its domination in the future. Chardonnay dominates plantings in Hawke's Bay and Gisborne. Merlot plantings are increasing rapidly in Hawke's Bay. They are expected to be 21% of the total plantings of vines in that region by 2003, and second only behind Chardonnay.
Around 78% of the national vineyard is grafted to Phylloxera resistant rootstock and this is predicted to rise to 84% by 2003. Central Otago, Canterbury and Waipara (North Canterbury) still have the greatest reliance on ungrafted vines, but the proportion of grafted vines is increasing in all areas.
There are now 358 registered wineries, with over 220 new wineries opening in the past decade. However, some reduction in winery licences is reflecting on-going industry restructuring to ensure that it can compete more effectively both domestically and particularly overseas.
Total New Zealand wine sales in 1999/2000 were estimated at 59.2 million litres, an industry record. Domestic sales were slightly ahead of last year at an estimated 40 million litres. Exports grew strongly with a record 12 months sales to March 2001 of 20.1 million litres, worth $204 million.
Competition from imports on the domestic market intensifies. While total wine imports were only up 3% in 2000 compared with 1999, imports of bottled wine rose 13.8%. The competition was most noticeable in the low-priced bottled and cask sections of the market, where product shortages and higher cost structures make it difficult for the New Zealand producer to compete. Australian wine dominates the imported wine growth on the domestic market.
Financial Factors
Revenue
Prices for grapes firmed considerably due to shortfalls in supply in 2001. This has continued a recent trend, particularly for premium varieties such as Pinot Noir, Sauvignon Blanc and Merlot. The national average price for Sauvignon Blanc has risen from $1,300/tonne in 1999 to almost $1,500/tonne in 2000. Chardonnay prices have remained more static at $1,300/tonne (1999) and $1,400/tonne in 2000. The national average price for Merlot has risen from $1,600/tonne in 1999 to $1,650/tonne in 2000. Pinot Noir prices have fluctuated, but are once again rising to $1,500/tonne. However, premium Pinot Noir for red wine production (compared with methode champenois) will fetch considerably higher prices than the national average. In comparison, prices for bulk grapes have remained static or declined to $500-$700/tonne. Therefore, gross returns for a premium wine grape producer are $11,700-$14,850/ha.
Expenditure
The cost of vineyard development is high at over $25,000-$27,000/ha, exclusive of capital investment in machinery, irrigation headworks, building, or other infrastructure, including bird control. The main costs are trellising ($8,000/ha), grafted plants ($10,000/ha), labour (for vine establishment, pest, disease and weed control), irrigation scheduling, pruning canopy management ($8,000/ha) and materials (fertiliser, sprays, herbicides and maintenance) ($2,000-$2,500/ha). The industry has estimated that the costs of successful market, vineyard and winery development for every 1,000 ha of plantings may be $200-$250 million.
Shortages of grafted vines continue with high demand creating two-year waiting lists from most nursery suppliers. This is despite the entry of some new nurseries into the industry. Prices for vines remain at $4.50-$5.00/vine.
Net Result
Interest in investment in the industry remains very high, both from local and overseas investors, particularly from Australia, the United States (US), United Kingdom (UK) and France. Most of the new investment is focused on large vineyard developments. The low value of the New Zealand dollar coupled with the rapid rise in New Zealand's export success is fuelling the growth and interest.
| Table 3: Annual Gross Margin for Wine Grapes ($) | |||
| 2001 - Premium Varieties | 2001 - Bulk Varieties | ||
| Income: 8 tonnes/ha @ $1,650/tonne | 13,200 | Income: 16 tonnes/ha @ $700/tonne | 10,500 |
| Expenditure: | Expenditure: | ||
| Pruning @ 70 c/vine | 1,400 | Pruning @ 70 c/vine | 1,400 |
| Sprays/herbicides | 1,210 | Sprays/herbicides | 1,210 |
| Training/desuckering/shoot thinning | 2,080 | Training/desuckering | 1,680 |
| Trimming | 300 | Trimming | 300 |
| Harvesting @ $60/tonne | 480 | Harvesting @ $60/tonne | 900 |
| Leaf pluck @ 20 c/vine | 400 | Leaf pluck (machine) | 250 |
| Gross margin | 7,330 | Gross margin | 4,760 |
| Source: Clarke Horticultural Consultancy Limited | |||
Issues and Trends
Wine exports for the 12 months ended March 2001 totalled $204 million from the shipment of 20.1 million litres. This represents an increase of 35.2% in value and 12.2% in volume over the same period in 2000. The strong export growth continues the trend of recent years which has now seen exports double in value since June 1998.
The weaker New Zealand dollar has assisted this effort, but the strong growth also reflects continuing rises in wine quality standards fuelling strong international demand from the UK, US and Australia. Current projections suggest exports will double in volume to around 40 million litres by 2005.
The acquisition of the second largest wine producer (Corbans Wines) by the largest producer (Montana Wines) occurred during the year. Further acquisition by Australian-based large wine companies of smaller New Zealand wine producers also occurred with Nobilo Vintners purchased by BRL Hardy and a majority shareholding in Matua Valley Wines by Beringer Blass. The need for greater marketing strength and supply in a competitive international marketplace has been the main driver behind the continuing rationalisation within the industry.
With the rapid expansion of the industry, generic promotions by the Wine Institute are growing in frequency and scale. The relaunched New Zealand Wine Trade Fair, under the auspices of the National Hospitality Show, attracted 130 wineries, and 3,000 visiting trade personnel and consumers in 2000. Over 50 events valued at $1.5 million offered overseas audiences the opportunity to sample over 2,500 wines and this is expected to expand to events worth over $2 million in 2001.
Moves to assure the integrity, safety and identity of New Zealand wine has made significant progress following recent controversy over mislabelling and poor record keeping. The Wine Institute has published a "Code of Record Keeping Practice for Wineries". This details the items the industry considers mandatory for a sound record keeping system and procedures to achieve these standards. The Ministry of Health now requires exporting wineries to comply with the code. Compliance is validated through audits conducted on all exporters, representing 97% of New Zealand wine production. Audits will be held annually.
The Australia New Zealand Food Authority is making progress towards a new wine standard to replace current prescriptions in the food regulations of both countries. Updating of the Wine Makers Act 1981 and the Wine Makers Levy Act 1976 continues, with the Minister of Agriculture appointing a committee to review this legislation.
Excise tax of $120 million remains a concern to the industry. However, the industry was pleased that no ad hoc excise tax increase occurred in 2000. A review of excise policy continues to be requested.
A merging of the two major grape and wine organisations - the NZGGC and the Wine Institute - is imminent. The need to rationalise the two organisations has driven the negotiations, indicating a collective interest in the ownership of the brand "New Zealand Wine".
The industry continues to actively promote a green image to domestic and international markets. Industry-funded research work on finding "green" solutions to issues such as botrytis bunch rot, winery waste management, and the Integrated Winegrape Production Scheme (IWPS) continue. Over 50% of the national vineyard is managed using IWPS inputs.
Contact for Enquiries
Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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