If you want to know why the wine industry's up the creek without a paddle, just look to those at the top. Join the Wine Institute of NZ Inc and stuff up a good thing.

There's no doubt about it, New Zealanders are great at snatching defeat from the jaws of victory when it comes to things agricultural.

We've read and heard a lot over the past six months about how the grape-growing and wine-making industry has sunk into the doldrums. The most comprehensive, and honest article was written in North & South magazine by Mike White, which finally told us some home truths. Namely, the soft-cocks at the top of the Wine Institute, who'd been pushing exports by bulk, had stuffed up.

Leading winery owners such as Michael Seresin did not hold back, as when telling of his shame at finding New Zealand sauvignon blanc on sale -- two bottles for 10 quid -- in London. Our New Zealand brand is stuffed. Will it recover? I very much doubt it.

But Philip Gregan, NZ Winegrowers' Chief Executive, has for years boasted not of the quality of exports, but of the dollar value of exports, and the tonnage of exports.

The current crisis is not "a perfect storm" as Gregan told White. It was predicted years ago by one of this country's top winemakers, Neil McCallum, of Dry River, but stupidity and greed blocked the ears of those who hurtled into the real estate agents' offices to throw money at land, land, land so they could plant endless hectares of sauvignon plonk in Marlborough. No one stopped -- duh! -- and asked the question, "Who is going to drink all this wine?".

Or, "Do we need to make good wine?".

At the same time, the Wine Institute -- to which, I might add, we are required by legislation to belong -- is herding everyone into 'environmental sustainability'. From the 2010 vintage, we will not be able to enter at least the Air New Zealand wine awards unless our vineyards are accredited sustainable (and these are very loose standards according to which part of the country your vineyard is).

This is all about marketing overseas, and New Zealand's so-called clean green image. But what about financial sustainability? In the past six months, eight major vineyards and wineries have gone into receivership, two of them with debts of $20 million. Imagine what that has done to those local economies, to employment in those areas?

Yet in the latest Winegrower magazine, Philip Gregan's editorial, 'Lessons from 2010', blathers on in platitudes about nothing.

Do you remember the summers or 1986 and '87? Back then I owned The Gables Restaurant on Russell's waterfront, and I can't remember who it was, but someone gave me a sample of nectar. It was Kevin Judd's Cloudy Bay Sauvignon Blanc. First I thought I'd died and gone to heaven. When I came to my senses, I wrote out a cheque for $30,000 to secure as much as I could for my customers. We couldn't get enough of this -- demand well outstripped supply.

Cynics believed those early vintages of Cloudy Bay did so well because of clever marketing strategies -- supplies were deliberately withheld, creating a false demand. But that wasn't the situation. It was simply a fantastic wine. Judd was -- and still is -- a gifted winemaker for whom near enough wasn't good enough. He wasn't in it for the money, for the exports, for the bulk sales.

Today, Cloudy Bay is owned by Moet Hennessey and, at least to my palate, lost the Kevin Judd magic. Judd's moved on to his own label -- Greywacke. But in a recent article he had this to say about his then winemaking policy with Cloudy Bay:

"It was never a contrived scarcity, we just never seemed to have enough. The markets then were growing much faster than our production could increase. We always had a policy of organic growth and there was never a huge amount of money to feed back into the company or business to fuel rapid expansion.

"The company also had a policy of never blending inferior batches, so in the years when yields were down, or weather affected fruit, production levels also dropped."

This should be a mantra for the wine industry, which is whining on about not enough money for investment, poor returns, and 'only just breaking even'.

Winemaking is not a get-rich-quick-scheme. If you want ponzi, buy Lotto. If you want idyll, buy an airfare to Provence. And finally, we have people capable of making astounding wines, so why do we continue to make piddle, then send it overseas and let the industry leaders boast about it?

Comments (27)

by Mark Wilson on December 13, 2010
Mark Wilson

How did Coddington get on this blog?

I thought it was against the blogs reason d'atre to support any personal responsibility?

by Andrew Geddis on December 13, 2010
Andrew Geddis

I suspect Deborah is here 'cause of her talents. There is no "blog reason d'atre", aside from being smart, concise and  thoughtful.

There is however, a blog policy that people trying to show off by using clever foreign phrases know how to spell them.

by Mark Wilson on December 13, 2010
Mark Wilson

"aside from being smart, concise and  thoughtful"

Shome mistake surely (see Private Eye)

by Andrew Geddis on December 13, 2010
Andrew Geddis

We make the occasional exception for commentators. We regard it as a form of charity, for which Allah will bless us.

by william blake on December 13, 2010
william blake

you may have meant to say soft corks rather than soft cocks Deborah but it is good to see that you put your money where your mouth is...

2 bottles for ten quid is better than the 2 bottles for six that the Aussies are getting in Londinium.

by peasantpete on December 13, 2010
peasantpete

Sorry Deborah, there has been an international wine lake for many years.  In fact an international alcohol lake for many years.

There are going to be (very many) casualties, internationally, do not be surprised to see NZ producers disappear.

by Deborah Coddington on December 13, 2010
Deborah Coddington

Mark, wtf are you talking about? Are you tired and emotional. (Yes, some of us have also read Private Eye.)

Peasantpete, New Zealand once was celebrated for its Sauvignon Blanc, therefore could command top dollar. Two bottles for ten quid is not top dollar. There may have been an international wine lake for 'many years' but not of our best varietals.

by Mark Wilson on December 13, 2010
Mark Wilson

Deborah I am mocking the leftys that inhabit this blog but as I am usually either being redacted or barred I have to be a little subtle about it.

As you know leftys are big sooks and can't argue a point unless it is tiresomely respectful.  

by Andrew Geddis on December 14, 2010
Andrew Geddis

Stop whinging, Mark, and take some personal responsibility for your actions (and the consequences these attract). This constant  donning of the cloak of victimhood is all a bit, you know, boring.

by Andrew Geddis on December 14, 2010
Andrew Geddis

Deborah,

On the actual point of your post ... isn't what you are describing basically a classic speculative bubble? So there appear to be riches available from a new product (be it Sav Blanc or tulip bulbs). Lots of new producers rush into the market, caught up in the relentless optimism of the times and unaware of just how many other hopefuls are out there doing exactly the same (thus creating an oversupply of a previously rare product). Driven by demand, the value of land escalates beyond its "true" point, meaning lots of people sink too much capital into their ventures. To try and recoup some of that loss, and unable to realise the previously high prices attracted by a no-longer rare product, they drop their prices just to get a sale ... thereby hurting the premium image of the product and making it harder for all other producers to attract high prices. Thus, individual actions taken for quite rational purposes end up hurting everyone.

So ... comme ci, comme ca ... or, the story of just about every new product ever?

 

Of course, that's all without looking at the impact that the GFC may have had on consumers' preparedness to pay top-dollar for a bottle of plonk to impress the neighbours. And also ... we're certain that the "New Zealand Sav Blanc" on sale in London was from here, and not Chilean wine repackaged as a more attractive drop?

by Deborah Coddington on December 14, 2010
Deborah Coddington

Andrew, yes, but why don't they take some responsibility for their actions, instead of blaming everyone else? And no, they are not 'rational purposes', they are individual actions taken completely irrationally. Anyone with half a brain would have asked the question, who is going to drink all this wine? It's a simple question and the dickheads (or soft cocks, not soft corks) at the top did not stop to ask it. They just blundered on with dollar signs or tonnage figures in their eyes. And now they are blaming everything - the recession, the government, the high dollar - except their own stupidity.

Or am I stupid in expecting people to take responsibility for their own actions?

by Deborah Coddington on December 14, 2010
Deborah Coddington

And sorry Mark, I completely misunderstood your first post. I'm so used to being kicked up the arse, I thought you were giving me a boot!

Just proves, because you're paranoid, doesn't mean they aren't out to get you! :) xx

by william blake on December 14, 2010
william blake

What are you suggesting Deborah, price fixing? How about chucking on a few import tariffs at the same time? The free market may not be led by 'dickheads' but it certainly attracts them as followers.

Did the wine institute have anything to do with the whopping 75% reduction in the grape harvest in Marlborough at the end of the 2008 season? Which manifest in a pruning pattern that improved the quality and dropped the yield?

And I am waiting for the predicted slump in wine prices at home.

Cheers for the season.

by Andrew Geddis on December 14, 2010
Andrew Geddis

Deborah,

Sure, a number of winemakers have made foolish investment decisions - not just in the Sav Blanc trade, but in other varietals as well. But isn't that part-and-parcel of the market at work ... the vagaries of supply and demand doing its job? OK, some people may moan about it, but so what? It's not like the Government is suggesting changes to the law, extra-tax credits and limousine rides for the industry bosses!

Your main gripe, I guess, is with the industry leaders who (apparently) fostered a "quantity-over-quality" approach to production. This was, you allege, a wrong move. Yet at the same time you complain bitterly that these same leaders are "herding everyone into 'environmental sustainability'", so as to off-set likely consumer concerns about things like "carbon footprints" and so on. Isn't that a bit contradictory ... you complain that the industry leaders didn't take steps to protect market perception of our wines, then you complain when they do?

Or, to put it another way, just what should those at the top be doing to get the Coddington seal of approval (it could be one of those innumerable award stickers that seem to grace every single bottle in the store ...).

by Christopher Gullidge on December 14, 2010
Christopher Gullidge

“but stupidity and greed blocked the ears of those who hurtled into the real estate agents' offices to throw money at land, land, land so they could plant endless hectares of sauvignon plonk in Marlborough”

While many people who established “sauvignon plonk” vineyards in Marlborough in the early 2000’s did so out of greed, it is incorrect to imply that all did so for this reason. Many of the vineyards established in this period were put in out of desperation. Land that had traditionally been used for sheep and beef farming had not been financially sustainable for many years. Particularly land in the upper Wairau, Awatere and Flaxbourne valleys. Diversification into winegrowing was seen by many as the only way to make farming in these areas financially viable, if only for a little while.

Stupidity no doubt blocked the ears of some and greed of others, but to suggest that all these vineyards were established to “get rich quick” or to have the “idyll” as you write is incorrect.

by Deborah Coddington on December 15, 2010
Deborah Coddington

Andrew, one thing "those at the top" could do is do away the the compulsion aspect. Under legislation all winegrowers must pay to belong to the Wine Institute Inc. If they're so bloody good, wouldn't growers, etc, be clamouring to belong? While it's compulsory, they can just sit on their butts and get away with mediocrity.

William, of course I'm not suggesting price fixing, or tarriffs. Where did you get that idea? In fact, greed, per se, doesn't worry me. It's when people come unstuck from it but won't accept it was their own greed - or poor business acumen, over borrowing, under-capitalisation, call it what you will - which cause their receivership.

Christopher Gullidge - you just proved my point, when you said grapes were planted here to make this land financially viable, "if only for a little while". Since when has any form of farming been financially viable "only for a little while". Isn't that weasel words for "get rich quick"? Well, it was when I was a little girl and Dad taught me about farming. Farming is being in it for the long haul. It's cyclic. It's not the stock market, mate.

You say sheep and beef had not been financially viable "for years" on that land, but I'd like to see figures backing that up. Are you saying compared with grapes at that time? Are you basing that on market prices for sales of hectares? Let's get some empirical evidence into the debate here, instead of some airhead television type business reporting where one size fits all.

by Mark Wilson on December 15, 2010
Mark Wilson

I am sorry Deborah but you are arguing with people who wouldn't understand a financial concept (other than taxpayers largess) if it hit them in the head.

by Andrew Geddis on December 15, 2010
Andrew Geddis

Mark: Aren't you meant to be over on another thread setting out your solution to how to tell "proper" beneficiaries from "thieving" ones? Because you're at real risk of appearing to be a big talker/non deliverer who really shouldn't be taken seriously.

Deborah: You didn't answer my question. The issue of whether producer boards are a good or bad idea is one thing. But what is your actual prescription for the wine industry in New Zealand? To say "let's all get back to the good old days of Cloudy Bay" is a bit pointless, given the increase in production since then and the fact that there's just too much Sav Blanc about to sell at $30-odd a bottle. Of course, if you really don't have any ideas about how to progress, then that's fine ... but it does make your post into a bit of a jeremiad. Which also is fine.

As for "when I was a little girl and Dad taught me about farming...", you mean back when there were guaranteed prices and state subsidisation of just about every aspect of production? Read this and then have a think about how well your Dad's worldly wisdom translates in the modern rural economy, where price volatility combined with factors like the weather, etc makes a nonsense out of the idea of sticking to one product through "cycles". Point being - in 1971 NZ had 58 million sheep. In 2007 we had 38 million. Why would that be, do you think?

All in the interest of avoiding airhead television type business reporting where one size fits all, of course.

by Mark Wilson on December 16, 2010
Mark Wilson

Andrew - my we are in a Christmassy mood.

Standing in for Grumpy while he is on holiday are we?

by Andrew Geddis on December 16, 2010
Andrew Geddis

Just calling it like it looks, Mark. You ever come across the concept of "added value" during your "wealth creating" activities? Try applying it on this site.

by Christopher Gullidge on December 16, 2010
Christopher Gullidge

Mrs Coddington,

In the words of one outspoken farmer of the Flaxbourne region;

The moment of truth came when I realised that we
could not keep on farming as we were, if we were to
remain financially and environmentally sustainable.

As for the financial viability of that land, to take the Flaxbourne district as an example;

Since 1997, farms in the area have received
about 14% less rainfall than the long-term
average. Lack of rainfall is exacerbated by
westerly winds, leading to soil erosion
particularly on northern faces of hill country.
Farmers have coped with drought by
measures including de-stocking, but the longterm
impact has been economic hardship for
the district.

Here is a link to the publication of the Starborough Flaxbourne Soil Conservation Group which these two staments are quoted from. The people of this district have dealt with drought after drought. In times of economic hardship the notion of "being in it for the long haul" as you say gives way to just being able to make it through the next season.

The farming philosophy of "live like you will die tomorrow but farm like you will live forever" is by no means limited to the Coddington clan but as any farmer realises needs must when the devil drives.

by Richard on December 17, 2010
Richard

Having been involved in the Marlborough wine industry for 30 years, the current situation, in my mind can only be compared to another historical disaster ; that of Erebus. That too preventable

The words of Justice Mahon come to mind...an orchestrated litany of lies.

by Deborah Coddington on December 19, 2010
Deborah Coddington

1. Richard, re Erebus, I don't understand how something can be too preventable. Sorry. In the words of Pauline Hansen, Please explain.

2. Christopher - they obviously "destocked" too little, too late.

3. Andrew - yes, we had SMPs, subsidies, but when they came off (after Dad died) farmers were better off, actually, because at the same time the top tax rate dropped, import licences went, tariffs went, etc etc. You know all this anyway. It worked both ways because every producer is also a consumer.

I guess my prescription for the wine industry is - and I don't expect anyone to listen to me - is that we should go for the high end of the market because that is what we are good at. People like Kevin Judd at Cloudy Bay proved that. He made magic wine, so wonderful he could command high prices, nobody could get enough of it - I paid cash up front for as much as I could get. Where the industry went wrong is the never-mind-the-quality-just-feel-the-width mentality. We just don't do the commodity thing well here. With all that mediocre-at-best wine sloshing around the world it was obvious we were going to come unstuck. And if you'd been in the industry in Marlborough for 30 years well, I'm sorry, you should have seen it coming.

We need to get back to high quality wines, medium to high priced. Is Te Kairanga making money out of the bargain basement priced wine in the supermarket? No. Right now you have to be really, really big, (and there are very few of them in NZ who are still financially stable) or small with a very high quality product selling at a high price with a good return, resisting the temptation in your head which says, "Shit, if I can sell 2000 cases of this @ $25 a bottle trade plus GST, I can sell 20,000 cases of this ...

 

by Christopher Gullidge on December 21, 2010
Christopher Gullidge

Deborah,

I provided some emperical evidence in support of my argument that not all folk who established vineyards in Marlborough in the early 2000's were motivated by greed and stupidity. Would it be possible for you to provide some emperical evidence in support of your argument that ALL folk who established vineyards in Marlborough in the early 2000's were motivated by greed and stupidity?

I imagine that emperical evidence in support of the contention that greed and stupidity were mental elements of ALL the folk who established these vineyards might be somewhat hard to come by. Despite the difficulty in finding this emperical evidence I am sure you would not hold me to higher journalistic standards than you hold yourself.

by Christopher Gullidge on December 21, 2010
Christopher Gullidge

Oh and I mean empirical, not emperical, of course. My mistake.

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