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Tuesday 29 July 2014

NZ acts on lessons of 2008

14th February, 2013 by Gabriel Savage

Philip Gregan, CEO of New Zealand Winegrowers has stressed the country’s need to protect profitability by raising prices.

Photo credit: Peter Burge

Photo credit: Peter Burge

Speaking to the drinks business, Gregan admitted that, following the glut of discounted New Zealand wine released onto the market in the wake of the large 2008 harvest, “there have been a lot of lessons learned.”

Among the most important of these, he continued, “is that our core business is being quality oriented and being true to what we can do well.”

Aligned with this aim, he said: “In the long term it will be about lifting prices – it has to be. We believe ultimately that the area for vineyard planting is constrained. The laws of supply and demand are immutable.”

With New Zealand wine’s average retail price in the UK currently standing at £6.41, considerably higher than the total UK wine average price of £5.03 (Nielsen 05.01.13), Gregan predicted: “You’ll see an increasing offer about £10 and a drop out of the sub-£5 bracket, so the average price will go up.”

He set this shift as part of a wider move by producers worldwide to adopt a more balanced approach to their UK business model. “It’s fair to say that producers around the world were subsidising the UK market because it’s seen as so important. That drove volume but you can only do it for so long.”

Despite the pricing challenges of the UK market, Gregan reported positive feedback from importers of New Zealand wine. “People still see a significant opportunity for New Zealand wine in this market – and at higher price points not lower,” he remarked.

To support this quality focus and accompanying price hike, Gregan pointed to an ongoing positive evolution among New Zealand’s wine producers. “There’s an increased confidence about what we’re doing and why we’re doing it, whether that’s Central Otago Pinot Noir or Hawke’s Bay Syrah,” he observed.

At the same time as the country hones these flagship strengths, Gregan stressed the importance of a continued focus on experimentation. “We don’t have history so what we can bring to the world is continued innovation,” he remarked, pointing to current examples such as Brancott Estate’s launch of an age-worthy Marlborough Sauvignon Blanc.

While the large harvest of 2008 presented pricing and image problems for New Zealand, Gregan pointed to the boost this extra capacity offered for winemakers looking to push the boundaries.

Philip Gregan, CEO of New Zealand Winegrowers

Philip Gregan, CEO of New Zealand Winegrowers

 

“Up until 2008, our supply of Sauvignon Blanc was so tight that there really wasn’t room to do too much innovation,” he explained. “With a greater supply people asked ‘Can we do something different?’ and you started getting these barrel fermented, sparkling and wild ferment wines that are really exciting in terms of style and diversity.”

Despite the opportunities to strengthen its UK position, NZWG’s government funding remains primarily targeted towards developing less established markets.

Chris Stroud, who took on the newly created role of European marketing manager for NZWG last year, explained: “My role is more European based,” as he highlighted Germany, Sweden and the Netherlands as a priority focus.

Turning to his UK strategy, Stroud spoke of “trying to maintain the status quo”, with a main focus on “keeping the media informed”.

Gregan supported this approach by emphasising that, while mature markets such as Australia and the UK remain “a huge part of our business”, the advantage of this media focus was that “the British media influence is not just in the UK.”

Among the other important markets for New Zealand at the moment, Gregan described the US and Canada as going “incredibly well”. Meanwhile the country’s free trade agreement with China has made it “a very significant medium to long term project”, with NZWG establishing a regional manager in Hong Kong last November.

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