A wine world rarity

26 June, 2018

BOOM AND BUST

But growers in the region are a little wary of cycles. The boom and bust around the 2008 vintage is still quite fresh in people’s memories. In 2008 grape prices were at an all-time high of NZ$2,400/ton, but there was a crash because of over-production and the global financial crisis. This meant that by 2010, these prices had dropped by half to $1,200/ton. Some growers and smaller producers are concerned that a similar reversal of supply and demand could occur in the future, if the brand of Marlborough Sauvignon is damaged, or Sauvignon falls out of fashion.

One threat identified by the participants in the Marlborough Vineyard Model is that of opportunistic buyers purchasing excess fruit at prices 75% lower than the district average. When a grower is given a contract, there are usually conditions attached. For example, it might specify 22 Brix ripeness and less than 5% rot. If it fails this, it can be rejected, or there can be a renegotiation of price. The contract will also typically specify a yield cap. Any fruit above this yield cap can then be sold on by the grower at a lower price, as long as the contract doesn’t prohibit that.

It is partly these excess grapes that are being turned into inexpensive wine by contract wineries then sold to large supermarkets under private labels or soft brands. Indeed, in 2017 40% of total exports were in bulk, up from 34% in the previous year.

Are major brand owners concerned about bulk shipments? “The bulk market has existed for some time,’ says Patrick Materman of Brancott Estate. “And, while it’s not the highest value segment, we feel it has a part to play in introducing consumers to Marlborough Sauvignon Blanc at an accessible price point, from which they can then trade up to more premium offerings.”

Pernod Ricard, owner of Brancott Estate, has traditionally favoured building brands, and sometimes this means it has to draw back from markets where price is dominant and private labels abound, such as the US and UK.

“Marlborough Sauvignon Blanc continues to grow in popularity, but there is very little land available in the region,” says Materman. “This land constraint is leading to demand outstripping supply, and a likely grape price increase as a result. As supply becomes constrained, producers of branded wines will focus exports on higher-value emerging markets where private labels are less prevalent, rather than some mature markets where promotional activity and consumer price sensitivity have eroded profitability.’

BRAND OR COMMODITY?

So is Marlborough Sauvignon Blanc a brand or a commodity? For it to benefit all in the region, it needs to be a brand, with a brand promise. If Marlborough Sauvignon is to be a reliable brand promise, then each bottle on the market needs to be good quality. If there is a lot of cheap Sauvignon being exported in bulk and sold at a low price, and which doesn’t have the defining characteristics of the wine that has built up the reputation of the region, then brand equity will be spent, and eventually bleed out. Then all that’s left is a commodity that sells only on the basis of price.

Most of the region’s stakeholders are aware of this and some are trying to think of ways of preventing it. One way would be to bring in some rules, and there are advanced plans for an unofficial appellation called Marlborough Pure. Another option might be to clamp down on bulk shipments, but some large brands ship in bulk and bottle in market, so this would be problematic. Ultimately, the region needs to have a strong community that self-polices. It’s such a great success story, it would be a shame for this brand to be devalued through bad, cheap wine.





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