The rest of the world has looked on with envy in recent months as New Zealanders have partied hard at music festivals, nightclubs and sporting events. Pictures show smiling Kiwis wrapping their arms around one another, sipping wine and enjoying life in the post-Covid era. These look like postcards from the future to many people in countries whose governments have bungled their responses to the pandemic. However, it is not all plain sailing in New Zealand.

The country initially managed to eliminate community transmission by closing its borders, so it has suffered from a lack of tourists. Some small Covid-19 clusters have also been detected this year, causing local lockdowns in certain areas, while there are still limits on public gatherings in cities including Auckland. As such, the wine industry has seen on-trade sales dwindle.

“We’re incredibly lucky in New Zealand to be in the position we are in, but there’s no denying that the on-premise channel has been impacted due to the pandemic,” says Liam Kelly, general manager of sales at Yealands. “While Covid-19 has not been eliminated in New Zealand, it has been for the most part contained, but the closure of the borders and lockdowns have had an undeniable effect on businesses reliant on tourism, including hotels, bars and restaurants. We have seen an uplift in domestic sales over the past eight or so months in retail and grocery, and, as with most other countries, online sales grew during the initial lockdown.”

Aaron Drummond, general manager at Craggy Range, says the business has enjoyed “incredibly strong domestic sales”. But he adds: “Like most markets in the world, this was primarily driven by retail. Interestingly, despite the on-trade being generally open and free to trade, the major cities have struggled.

“Most on-trade distributors in Auckland have said business has been down 10-15% in the Christmas quarter. The general view is that with more people working from home part time, and less business travel, the Auckland and Wellington on-trade has not fully recovered to 2019 levels. While domestic tourism has been strong, it has bene ted the regions primarily, rather than the big cities.

“If we look at our own experience here in Hawke’s Bay, visitation has been up despite no international tourists. While that has been incredibly positive for our wine club and cellar door, generally domestic tourists spend less in restaurants and bars compared to international and business travellers.”

LEARNING TO LIVE WITH COVID

When Drinks International interviewed Josh Scott, winemaker at Allan Scott, he was about to meet up with a bunch of friends in Marlborough, but Auckland had been locked down for a week a er a community cluster of the more contagious UK coronavirus variant was discovered. “We have minimised Covid-19 and learned to live with it, I guess,” he says. “People are socialising, going out, having drinks and trying to live life normally, but we certainly miss the tourists, no doubt. Local sales have been good, I’d say online sales have bene ted the most.

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“Exports have been going OK. However, New Zealand has struggled with getting enough containers into the country. Long story short, we still haven’t enough and trying to source empty containers and vessels to get the wines on has been very challenging, sometimes delaying shipments up to a month. As this is seen around the world, vessels are also getting behind schedule and, in turn, they are omitting ports, this too leads to orders being rolled and taking longer to sail.”

More than 85% of the wine produced in New Zealand is exported, according to trade body New Zealand Winegrowers. Despite the logistical challenges, exports have remained strong during the pandemic. NZW figures show exports increased 5.6% year on year to 286.5 million litres in the 12 months to June 2020, marking the 25th consecutive year of export growth. Exports then shot up by 19% year on year in the next four months – July to October 2020 – meaning that annual export values have now smashed through the NZ$2 billion (US$1.44 billion) barrier for the first time.

“This milestone reflects the appreciation that the world has for New Zealand wine, and reinforces our international reputation for distinct, premium and sustainable wines,” says Clive Jones, chair of New Zealand Winegrowers.

New Zealand generally commands a premium compared to most other countries in export markets. For example, it is either the highest or second highest priced wine category in the US, UK, Canada, and China – o en vying with France for top spot. “We are optimistic that demand for New Zealand wine will continue to grow in the year ahead, and then it will become a question of whether our supply can meet that demand,” says Jones.

Kelly at Yealands reports that exports have been “really strong in all key markets” over the past year. “The UK in particular has seen our forecasts exceeded since the middle of last year, with Yealands Sauvignon Blanc in the UK and US growing significantly ahead of the New Zealand Sauvignon Blanc category,” he says. “We’re seeing continued export growth in 2021 and look set for another record month at the end of March. We did have to navigate the channel switch of sales to retail and online as a result of consumers’ increased at-home consumption, with the closure of on-premise business globally due to Covid-19 lockdowns, but overall we’re seeing the NZ wine category outperform the total wine category in almost all markets.

“The UK continues to look promising and exceed our initial forecasts, and we anticipate that on-premise channels in the UK, US, Canada and across Europe will begin to recover across the course of this year as the Covid-19 vaccines are rolled out in these markets and businesses can begin to reopen.”

ZERO-GROWTH POLICY

He hopes the rm’s new State of Flux range, featuring a Sauvignon Blanc produced using concrete egg fermentation and an unoaked Chardonnay, can continue to generate momentum in key markets, while Yealands is also starting to experiment with alternative varieties such as Grüner Veltliner.

Craggy Range has not fared quite so well due to its reliance on the on-trade. Around 70% of its export business goes through the on-trade, “so obviously we had a challenging time initially when major markets locked down, especially the UK and US”, says Drummond.

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“We do have some great retail partners, and markets like NZ and Australia have been relatively strong across all channels, so while we were not at 2019 levels, we were OK,” he adds. “We are extremely fortunate that our business is in a 1,000-year family trust, so we can continue to focus on brand and quality, and ride the bumps without having to take short-term decisions that could be detrimental. This meant that we kept 100% of our staff employed, and were able to rebound quickly when markets reopened.

“Talking to a lot of friends in the NZ wine industry, the smaller producers have struggled, as they rely on the on-trade and tourism, while the big players who are primarily selling volume into supermarkets have been the main beneficiaries of lockdown and retail spending. So, while the industry as a whole looks pretty rosy due to huge li in the volume of Marlborough Sauvignon Blanc selling into supermarkets, the pandemic hasn’t been great for New Zealand’s fine wine aspirations, especially Pinot Noir, which are largely on-trade products. I imagine this is the same the world over though. 

“Our focus has always been on the top four export markets for NZ wine, being the US, UK, Australia and Canada. We have high expectations that these markets, and the on-trade specifically, will bounce back well post vaccination, so really focusing on supporting our distributors in this rebound.”

One company that could not care less about achieving growth is Felton Road. In fact, the Central Otago producer has actively pursued a zero-growth policy for the past 15 years. Its Pinot Noir is sometimes described as the best in the world outside Burgundy. Production is capped at 150,000 bottles per year, and it is sold purely on allocation.

That could help to explain its strong showing in this year’s list of The World’s Most Admired Wine Brands. Felton Road finished 14th in the world, the top New Zealand producer.

Owner Nigel Greening has temporarily abandoned Wanaka for Devon, so he has spent lockdown in the UK while watching his friends enjoy themselves on the other side of the world. “We have been in very good shape,” he says.

“We have had what we saw as a slightly unhealthy lean to private customer and retail over on-trade for a few years now. That was a natural consequence of high private customer demand globally for us; there is more money in a distributor supplying direct to consumer or retail, when demand is such that annual allocation sells in hours or days, so the on-trade gets neglected.

“As it happened this was our good fortune. We moved a bit of wine scheduled for on-trade heavy markets to direct to consumer domestically and, of course, quite a bit of our cellar door stock to direct-to-consumer mail order. That worked well and sold out quickly. We were also lucky that most of our more on-trade markets were in Asia, where lockdowns have been brief. Our larger export markets – Australia, the UK, Hong Kong and the US – have all stayed very strong. Certainly in the UK quite a few of our fine wine merchants sold their annual allocation in hours. So we have sold through in the markets, not just out of the winery.”

Greening has been following the situation in New Zealand keenly over the past year, and says it has been a mixed bag for the industry. “Those with broad export strategies and a solid strength in retail and direct to consumer internationally as well as domestically are doing great. Those who focused on on-trade, whether internationally or domestically, can be in a lot of pain. Of course that focus may not be a strategy – often it is just a consequence of a distributor that you appoint in a market and where their priorities lie.”

He hopes to see more excitement from New Zealand in the years ahead. “I have been feeling for some time that the New Zealand wine grower is somewhat boring to the enthusiast. The consumer probably doesn’t see it that way, there is fantastic reliability and quality across the board. But not a lot of excitement.

“Partly this is because it is a mature wine production country now, where the cost of establishing oneself is very high, so tricky for new younger players. But we are definitely seeing more interesting and new ideas emerging, maybe the result of boredom over lockdown. I have been reading Rebecca Gibb’s reviews on Vinous and been struck by quite a selection of orange wines, Albariño, Chenin, Muscat, Grüner Veltliner, Viognier, Marsanne and a steady growth of good Chardonnay. I applaud this. We need more.”