NZ Winegrowers Look to Restore Image After Glut

Striding across her vineyard in New Zealand's picturesque Marlborough region, winemaker Jane Hunter pauses for a moment to reflect on the woes besetting the industry she pioneered.

"It's been a bit soul-destroying really," she says. "If we're all going to survive, we've all got to work together."

"New Zealand wine's always been the good news story," she adds, citing a reputation for quality that allowed it to command prices other new world producers such as Australia and South Africa could only dream of.

Marlborough, nestled at the top of the South Island, seemed particularly blessed as the world fell in love with its crisp, zesty sauvignon blancs.

What had been hardscrabble sheep country until the late 1970s -- when a few adventurous winemakers decided its dry, cool climate might suit grape growing -- rapidly transformed into a landscape dominated by endless rows of vines.

New Zealand's grape growing area, led by Marlborough, tripled in size from 2000 to 2010 as new growers jumped into the market hoping to reap rewards from an apparently insatiable demand for New Zealand white wine.

Inevitably, the boom came to a crashing halt. Bumper harvests in 2008 and 2009 led to an oversupply of grapes, forcing the price per tonne to plummet 40 percent in two years.

"There was a bit too much planting, we got a bit ahead of ourselves and there's been some correction there," said Anna Flowerday, who owns the Te Whare Ra winery just outside Blenheim.

"It's been unfortunate because there's been some good people who have gone out of business. But it's bound to happen, anything to do with agriculture's quite cyclical and we're already seeing positive signs of it coming back."

She said some winemakers, desperate to recoup something from their crops, sold at below cost, leading to a flood of "bulk wines" in New Zealand's export markets that were inferior in quality to the premium bottled product.

Bulk wines accounted for 28 percent of New Zealand's wine exports in 2010, up from nine percent two years earlier.

They are bottled overseas, given generic labels identifying them as New Zealand sauvignon blanc and sold at knockdown prices on supermarket shelves.

Describing the taste of one of the bulk wines last year, British wine writer Victoria Moore wrote: "It smelt tired, had lost its fresh zing and had the starchy, watery taste of slices of raw old potatoes."

For Hunter, such damning assessments to New Zealand's reputation are hard to take, given the decades she has spent positioning the country as a quality sauvignon blanc producer.

Her late husband Ernie won the New Zealand wine industry's first international wine award when he took an oak-aged sauvignon blanc to The Sunday Times Vintage Festival in Britain in 1986 and swept the competition.

It was a defining moment for New Zealand wine, comparable to the French wine tasting a decade earlier which put California's Napa Valley on the map and was depicted in the 2008 Hollywood movie "Bottle Shock".

Since then Hunter's Winery has gone on to win more than 100 international awards and Hunter herself won numerous honors for her role in building the industry.

"It's a bit down-heartening I have to say," she said. "You put a lot work into building a brand Marlborough and lifting sauvignon blanc from nothing in the mid 1980s, through to being the best in the world.

"Now it's becoming a kind of a bulk wine commodity, with everyone undercutting everyone just to sell some wine and forcing the price to go way down."

NZ Wine chairman Stuart Smith said in the industry body's 2010 annual report, released earlier this year, that winegrowers faced two years of consolidation, when they must concentrate on their reputation, not boosting capacity.

"Every bottle that bears the words 'New Zealand wine' should add to that reputation, not free-ride on it," he said.

While Hunter's and Te Whare Ra, which both supply the top end of the market, have survived the crisis relatively unscathed, Flowerdale said there were signs the industry in general was slowly recovering.

She said New Zealand winegrowers had to accept that the halcyon days when all their stock sold for top dollar were gone and market themselves accordingly.

"It's sort of a growing up process," she said. "Every great wine region in the world has a lot of different tiers (of quality).

"Champagne has them, Bordeaux has them. We just have to accept that it's a maturing period for our industry and we've got to roll with it."

Flowerdale said the emergence of cut-price New Zealand sauvignon blancs could even work in the industry's favor by exposing new customers to the wine.

"Hopefully then they'll trade up and start to explore other New Zealand wines," she said. "I'm a glass half-full person.