NEW ZEALAND: Not all white

New Zealand needs to extend its vinous offering beyond Sauvignon Blanc and into reds if it is to weather changing tastes and expand into fine wine, says Patrick Schmitt

While the rust-coloured rocks and roasted vegetation of Australia’s outback may have little connection with viticulture in the country, it is not an image at odds with the style of wine produced – which can be rich and warming. Similarly, the heat, beauty and passion of Italy sits comfortably with high-class red wine creation, and southern France, with its reputed rustic feel, fits neatly with the robust character of the vinous offerings. Then there’s South America, known foremost for juicy structured reds – despite the continent’s collection of cool-climate grape-growing areas – and Spain, where the colourful culture almost precludes, in the consumer’s eyes, the possibility of white wine production. But why mention these countries? Because such places, and more, are synonymous, whether accurate or not, with sun-baked landscapes, passionate people, and therefore rich red wines.
New Zealand on the other hand is different. It has highly powerful imagery, but its visual imprint is quite unlike anywhere else in the world. Vivid green pasture, clear water, snow-capped mountains, swirling seas and sheet-white clouds are just some of the immediate impressions of the country. Together, they create a feeling of purity, freshness and fertility, but not warmth – climatically or emotionally.
And while this has benefited New Zealand’s Sauvignon-Blanc centred white wine industry, it could be hindering its reds. In other, stronger words, it is effectively robbing the country of its vinous diversity.
Now while this matters little presently, with Sauvignon Blanc still in short supply – and fetching high prices internationally – should fashions change, and they will, New Zealand will have little else to offer the sometimes unpredictable consumer. However, should the country begin to build an international reputation for red wines now, on the back of its success with Sauvignon, it will ensure its place on the shelf when the tide turns against gooseberry-scented whites.

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Of course much has already been made of New Zealand’s potential with other aromatic grapes, in particular Pinot Gris, followed by Riesling, but while these varietals continue to extend New Zealand’s share of the shelf in whites, they have not increased its presence on the other side of the wine aisle – in reds – nor worked to expand its image beyond the “clean and green”. And each year the likes of Australia and Chile, South Africa too, are raising recognition for their regions, allying a range of grapes to a selection of distinct terroirs.
Furthermore, for the most part, there is a lower price ceiling on white wines, and although New Zealand commands increasing prices for its Sauvignons, if the country is to really expand into the fine wine market, it will need red varietals, and Chardonnay (see box, right).
It is also important to add that New Zealand is equipped to make a range of wine styles using a broad spectrum of grapes – but the success of Sauvignon is acting as a deterrent to diversity. This means encouraging variety and raising awareness for reds is a challenge, but not one necessarily limited by viticultural conditions. As John Hancock, CEO, Trinity Hill, reminds,  “New Zealand is viewed as this little place but it is 1,600km long, which means it spans the equivalent of Champagne to Madrid – there is no reason why there should be this singular view of New Zealand.”

So far, Pinot Noir has been the country’s beacon for red wine, while proving New Zealand can do more than Sauvignon Blanc. However, while crucial for the country’s fine wine credentials, it is hard to produce at commercial volumes. In fact, in 2007, despite an increased vineyard area, production of Pinot Noir dropped by 6% to 20,700 tonnes. This compares with 102,426 tonnes for Sauvignon and almost 39,000 for Chardonnay.
“There are 4,441 hectares of producing vineyard at the moment, and large vineyards are yet to come on,” says Erica Crawford, winery principal at Kim Crawford wines, when discussing Pinot Noir. However, she adds, “We find that contract growers are reluctant to plant Pinot, or are pulling due to the relatively low returns versus Sauvignon, so wineries are forced to invest and grow more own supply.”
In terms of demand, helping New Zealand’s Pinot cause is the varietal’s image. “It is sexy at the moment,” says Hancock, “and New Zealand is known as one of the few places where you can successfully grow Pinot Noir outside Burgundy.” Further, because Pinot is associated with cooler climates, this is one red varietal that suits New Zealand’s temperate image. “The perception the world has of New Zealand – clean, green, cool and aqua-esque – does not easily relate to red wine unfortunately,” says Crawford, “but this comment excludes Pinot Noir.”
Essentially, preventing New Zealand from developing Pinot sales further is the grape’s high production price, vintage variation, and therefore lack of commerciality relative to Sauvignon. Although Pernod Ricard UK’s wine development director Adrian Atkinson sees “Pinot Noir as the red variety that sits alongside Sauvignon Blanc from a brand perspective,” referring to Montana, he points out that “it carries at least a £1.50 premium [in the UK on-shelf] and we almost have to beg and steal to produce what we do.” He also says, “to do large volumes of Pinot Noir well you need dedicated facilities which stand idle for nine months of the year, making it very expensive.” Nevertheless, Montana is building a separate Pinot Noir facility in Marlborough.

In the UK market, high costs mean, for the multiple off-trade only, there is no Pinot Noir in the top 10 New Zealand brand chart. Rather, the highest selling is Oyster Bay’s Pinot Noir, in 23rd place, with 4,000 cases, and an average price of £9.15 (Nielsen multiple grocers MAT 03.11.07).  
Looking ahead however, there is still “plenty of potential for growth,” according to PLB’s wine consultant Kym Milne MW, citing new Pinot plantings in and around Central Otago, as well as around Christchurch and Nelson, and in Central Hawkes Bay, a cooler inland area of this region with a similar climate to Marlborough.
Already, looking at exports MAT to January for New Zealand Pinot, shipments are up 27% to 6.216m litres in total, with the US accounting for over 2.217m litres of that, and up 19%. The UK follows, up 19% to over 1.5m litres, followed by Australia, up 60% to 1.112m litres.
To continue growth however, according to Damian Martin, general manager at Winegrowers of Ara, New Zealand will need to cut costs. “The trick for the expansion of New Zealand Pinot Noir will be to increase the financial returns per hectare by improving one or both of the yields and price variables.” This may become increasingly pressing with greater volumes of price-competitive Pinots coming out of Chile, and also Argentina – Patagonia has even been likened to Otago ten years ago.

The case for Merlot
For Atkinson and others, at the mainstream end of the scale, “Merlot is an opportunity”. While the 2007 harvest for this varietal was only up 5% to 11,714 tonnes, making it the fourth most planted grape, behind Sauvignon, Chardonnay and Pinot Noir, with a 6% share of the harvest, exports have increased dramatically – up 68% in volume (MAT to Jan 2008), to total 1,860 litres. Certainly in the UK market – where Merlot exports are up 117% to almost 995,000 litres – it is Oyster Bay’s Merlot that is the best-selling New Zealand red in the supermarket sector, up 207% to 53,000 cases, and with an average price of £6.73 (Nielsen multiple grocers MAT 03.11.07). Henry Currie, UK national account manager for brandowner Delegat’s Wine Estate, explains the success. “People do tend to associate New Zealand with Sauvignon Blanc and for reds, Pinot Noir, so the performance of our Merlot is interesting. Essentially we have no issues getting it listed because it is a very well made Merlot, with soft tannins, and an unpretentious style – it hits the consumer’s sweet spot for New World Merlot.” Montana’s Cabernet/Merlot comes next, with a 30,000 case volume, up 22% on 2006.

As for Nobilo, Constellation’s vice president of marketing Clare Griffiths concedes: “It is still very early days for us on reds although we are looking at Merlot, as well as Pinot Noir, if we could get some.”
When it comes to Bordeaux blends, Hawkes Bay and within that, the Gimblett Gravels area, provides the best source, although it is, as Milne believes, “Merlot dominant blends that have more potential,” as opposed to those with a strong Cabernet bias, because the grape can struggle in cool years. Martin agrees, saying, “New Zealand can carve out a small niche for fruit-driven Merlot predominant blends.” Currently, exports of Cabernet and Cabernet blends are up 23% to 1,071,668 litres, the UK taking the majority of that with over 686,000 litres shipped to its shores, an increase of 38%.

However, as Crawford concludes, reiterating our initial point, “the problem for Merlot and Merlot-based reds is New Zealand’s image to the world, which is of mountains, green and water, so it’s hard to think of it as a premium Bordeaux producer.”
Nevertheless, red varietals from New Zealand are still important, not only in building distribution on shelf and raising prices, but also increasing recognition of regions other than Marlborough.
But while Marlborough is known for Sauvignon, Central Otago and Martinborough for Pinot Noir, Gisborne for Chardonnay (and Gewurztraminer), Hawkes Bay suffers from a lack of varietal specificity. As Hancock says, “It’s a complex story, so harder to tell.” And many believe the region should opt for Syrah as its flagship varietal. “Syrah from Hawkes Bay is very good, with really spicy peppery characters, and no similarity to Australian Shiraz,” says George Fistonich, MD and owner, Villa Maria. “There’s a strong feeling that the region should hang its hat on Syrah,” he adds. Certainly this grape is currently rather more fashionable than Merlot, which Fistonich says has suffered since Hollywood film Sideways maligned it.
Patrick McGrath, MD at Hatch Mansfield, UK agents for Villa Maria, is also supportive of the Hawkes Bay Syrah movement, saying, “Hawkes Bay will never compete with Chile or Australia with Merlot, its best bet is with Syrah,” noting, however, that the region “will probably sell more if it is marketed as Shiraz, but the style is different.” And on the subject of style, he records the successful combination of Syrah with Viognier in the region.
However, Syrah, like Pinot Noir, does suffer from high prices. “To achieve full ripeness we need to crop at 2 tonnes an acre, like Pinot,” says Kim Crawford, “so production costs are limiting.” And as Erica Crawford sums up, “I doubt New Zealand Syrah would ever rise as a volume driver but it fills an important role in our offering.”

Highlighting diversity
And it is this that is crucial: Crawford is referring to Syrah’s part in proving New Zealand is not a one hit wonder.
In other words, reds from New Zealand play an important role in developing a notion of diversity for New Zealand, highlighting varied regional and sub regional terroirs such as Central Otago and Hawkes Bay.
Reds also give New Zealand an opportunity to really grow the premium end of the market, and dip a proverbial toe into the fine wine sector. Looking at the UK market for example, New Zealand has an average price for white wine of £6.02 (Nielsen, multiple grocers, MAT to WE 29.12.07), and for red, £6.79, although that has dropped from £7.03 in 2006. Essentially, despite the proliferation of single vineyard Sauvignons, reflecting sub-regional variations, as well as the impact of oak ageing, or lees stirring, the grape does not have enough stylistic diversity to justify a luxury image. Syrah, Pinot Noir and Bordeaux blends on the other hand do.
Finally, red varietals are a vital insurance against changing tastes. “New Zealand is in long-term danger of building its repuation around one grape variety,” says McGrath, “and it can do other varieties brilliantly.” Yet more stark is the scenario according to Atkinson. “There’s a risk of commoditization: New Zealand becoming just Marlborough Sauvignon Blanc at the cheapest price.”

© db March 2008