Sheep Give Way To Grapes In New Zealand Wine Boom

Posted: Mar 29, 2017



A growing taste for more expensive wine in the U.S. and elsewhere is encouraging the world's biggest winemakers to turn New Zealand's sheep and dairy farms into vineyards.

Among major exporters, wine from New Zealand commands the highest prices of any country after France, according to the International Organisation of Vine and Wine, as the antipodean nation's cooler climate is more suitable to growing smaller volumes of higher-quality grapes.

Exports to the U.S. have nearly tripled in volume since 2009. At a time when American drinkers are willing to spend more per bottle, last year U.S. wine imports from New Zealand overtook Australia to rank the third highest by total value, after No. 1 Italy and runner-up France, according to the National Association of Beverage Importers.

Despite the rapid pace of growth, winemakers see plenty of room for further expansion in New Zealand. Companies such as Constellation Brands Inc. and Treasury Wine Estates Ltd. continue to snap up thousands of acres of New Zealand farmland, seeking to ensure access to premium fruit as part of a global strategy to make higher-quality wine.

Constellation, the world's biggest publicly traded winemaker by volume, added 1,800 acres of vineyards between 2014 and 2016, a nearly 50% increase in its New Zealand footprint. The Victor, N.Y.-based company, which makes Kim Crawford and Nobilo wines in New Zealand, is also spending NZ$50 million (US$35 million) to double the size of its main winery in Marlborough, allowing it to produce 40 million liters of wine annually.

Treasury Wine, Australia's second-biggest wine company by volume, recently bought 1,400 acres of land in Marlborough, a region renowned for its Sauvignon Blanc. And Cloudy Bay Vineyards, owned by European luxury goods company LVMH Moët Hennessy-Louis Vuitton SE, received regulatory approval in November to buy 52 acres there for an undisclosed sum.

The U.S. was the world's biggest wine consumer in 2015, the OIV says, and drinkers there have been willing to pay more for higher-quality product. U.S. sales of wine priced at less than $7.99 a bottle fell in 2016, while sales of more expensive wines increased, according to data from Nielsen. It says drinkers in Britain have shown similar behavior, with consumers shifting toward bottles priced from £6 to £7 ($7.3 to $8.6) and away from the £4 to £5 range.

The change in consumer preferences has companies snaring higher-quality wine assets outside New Zealand, too.

Constellation last year bought California-based Prisoner Wine Co. for $285 million, adding "fast-growing, higher-margin, superluxury wine brands" to the company's portfolio, it said. Also last year, Treasury Wine bought Diageo PLC's U.S. and U.K. wine business for $552 million, increasing its offering of premium wines.

Nearly 20 years ago, New Zealand wine barely registered with U.S. drinkers. Its wine exports to the U.S. have risen from about 2.5 million liters in the 2000 fiscal year to about 61 million liters in 2016, according to New Zealand Winegrowers.

In Marlborough, on the northern end of New Zealand's windswept south island, it is becoming harder to find suitable land for new plantings, industry participants say. And there is debate over how many more vineyards the valley-dotted region can accommodate, with the conversion of land previously devoted to dairy cows, sheep and other crops.

A 2016 study found large grape growers in Marlborough expected to plant nearly 6,500 hectares-or about 16,000 acres-of new vineyards by 2020, increasing the region's production area by nearly 25%, according to Wine Marlborough, a local industry group.

Meanwhile, tastes are shifting toward lighter styles, benefiting varietals like Sauvignon Blanc, analysts say. The wine made up 85% of New Zealand's exports last year.

Tim Heath, senior winemaker at Cloudy Bay, said the region's Sauvignon Blanc wines offer characters of passion fruit, grapefruit and boxwood. A cooler climate and longer growing season contribute to the wine's flavors. A Sauvignon Blanc from Napa Valley in California, in comparison, would be "more tropical, like rock melon and melon, and mangoes, and fruit salad sort of things," Mr. Heath said.

Phillip Neal, who is converting his farm to vineyards under an agreement with Cloudy Bay, used to have some 2,000 breeding ewes on his property, where he also grows garlic, alfalfa and sweet corn. Now he is down to about 700 ewes, with the figure bound to decline further as he switches over most of his roughly 180 hectares to grapes. He already grows grapes on 70 hectares and has been supplying Cloudy Bay for decades.

A short drive away from its winery in Marlborough, Constellation recently planted grapes on land that was previously a dairy farm. Rows of tiny vines in green plastic guards stand near an open-air shed holding dormant milk pumps.

"New Zealand is still relatively under-penetrated in the U.S. market, even though it's been growing at double digits," said Simon Towns, managing director at Constellation Brands New Zealand, the local subsidiary. "We think the runway's pretty long."


By Mike Cherney March 28, 2017 Source: WSJ




Go-Wine Sharing and Promotion

Go-Wine's mission is to organize food and beverage information and make it universally accessible and beneficial. These are the benefits of sharing your article in Go-Wine.com

  • It Generates Free Traffic to your site.
  • Your Article Will Get Indexed Faster.
  • Your Google Rankings Will Rise. Google Rise Articles with Positive Participation & Contribution.
  • Your Article Will Reach New Customers and Audience. Go-Wine has a selected audience and visitors from over 120 countries.
  • You always receive credit - you will be cited accurately (Author, Website & Hyperlink).
  • The integrity of the Information is not compromised - you always will be linked to the most up to date version of your article.

Contact Us for more information.

© 2018 Go-Wine©. All Rights Reserved.
Designed by CX Web Design. Vision of Wine Business Academy