Uncertain times ahead for local vineyards

As the vineyard harvest season begins, growers across New Zealand are bracing for an uncertain future.

Plummeting grape sales, coupled with skyrocketing shipping costs and a significant downturn in overall wine consumption, have created a daunting outlook for the industry.

Chris Drummond, a fifth-generation farmer with vineyards in Riwaka, Motueka, and the Moutere regions, describes the current situation as “the perfect storm.”
“The price per tonne of grapes has dropped, while shipping costs and delivery times have gone up,” Chris explains.

“Since the start of the ‘bulk market’ in 2010, New Zealand has doubled its wine production, resulting in an over-supply. Rising living costs have affected consumer spending habits, and we’ve also seen a complete change in people’s drinking habits.”

Supporting data highlights a surge in new beverage options and a growing trend towards ‘mindful drinking,’ influenced by factors like stricter drink-driving regulations which have prompted many to opt for beverages with lower alcohol content, including zero-proof options.

The bulk market refers to flexi-tanks, specialised bags that can transport up to 24,000 litres of wine per unit, reducing shipping costs. To put it into perspective, a single flexi-tank is the equivalent of three containers filled with bottled or packed wine.

Despite the current challenges, Chris remains cautiously optimistic about the future.

“We’ve downsized our vineyards strategically to focus on quality,” he notes. “Our exports to key markets such as the UK, US, and Australia are going well and we’re exploring new opportunities in the Caribbean and the Philippines.”

However, Chris’s situation is more the exception than the rule currently, as vineyards across the Top of the South find themselves without buyers for their grapes.

Lack of buyers due to decreased consumption and increased cost concerns persist beyond New Zealand’s borders. In France, for instance, the government is compensating vineyard owners for removing 28,000 hectares of vineyards—roughly equivalent to Marlborough’s entire vineyard area.

“In addition to all the other pressures growers are still contending with is low-cost, low-quality imported wines,” Chris adds. Some 25 per cent of the wine consumed in our country is imported. “Simple changes like decreasing wine imports would help local vineyards.”

Looking forward, the road ahead appears uncertain for vineyards unless significant market dynamics or weather events intervene.

"Unfortunately for small vineyards, it’s going to be very challenging,” Chris states “I believe growers are facing at least two to five years tough years ahead.”

General Manager Marlborough Wine Growers Association and Wine Marlborough Ltd Marcus Pickens says the overall downward trend in wine consumption means there is a lot of wine on the global market.

“Consumption trends are changing at the moment. Many of us are witnessing that personally, or within our extended families for lifestyle or economic reasons. There is a lot of wine on the global market which is also related to this and our route to market is also being affected by this.”

Marcus says overall, Marlborough Wine is in a strong position and remains unaffected by any hikes in shipping costs which have not been seen in Marlborough so far.

“Longer term, Marlborough wine is in a strong position; we don’t fight at the low end of the market which is fairly saturated, but we do have some rebalancing of supply and demand to address in the immediate term to ensure we get back to balance as quickly as we can.”