Although New Zealand is a relatively new wine producer, the country has established a strong reputation. Particularly known for its sauvignon blanc with 300,000 tonnes of this grape being produced each year out of the country’s total harvest of 400,000 tonnes. From this, 30 million 9LE (litre equivalent) cases are sold abroad, while New Zealanders drink about 11 million cases in total, importing 3-4 million. Its main wine producing regions are Marlborough, which is the largest by far, Central Otago and Hawke’s Bay. These regions house approximately 700 producers, of which the key names include Treasury Wine Estates, Pernod Ricard, Villa Maria, Delegat, Indevin and Constellation.
The domestic market is stable in terms of growth, but there are changes in what customers want. The market split is “just under 60% white wine… just under 40% red wine, and then the rest of it is… rosé, so around about 2% or 3%.” Red and white wine remain flat, while rosé, sparkling wine and low-alcohol wine are all seeing more interest. In particular, low-alcohol wines are being promoted. The national industry body, New Zealand Winegrowers, is leading an R&D initiative co-funded by the Ministry for Primary Industries’ Primary Growth Partnership – and their goal is “to position New Zealand as number one in the world in this new and exciting category of wine.” Consumers wanting to moderate their drinking more and living in bigger cities requiring more driving were also cited as reasons by our specialist. One example of a low-alcohol wine developed recently is Pernod’s Stoneleigh Bright, which contains 25% less alcohol than the standard.
The total value of New Zealand’s wine exports reached NZD 1.83bn (USD 1.16bn) in the year ending June 2019, up by 6% from the year before. One of the most valuable destinations is the US, as New Zealand’s wine maintains its price over NZD 10 – and its distinctive flavour is becoming more fashionable in America over riper styles. Canada is also important and is “starting to become a fairly substantial market”. However, there is less success in the UK owing to more competitive pressure, with supermarket chains cited as the reason for prices staying low. One reason for New Zealand’s global success is its wine’s accessible flavour: “From anecdotal evidence, it helps the category because it’s fresh, it’s crisp, it’s easy drinking, it’s all the things that people love about wine.” This is particular to New Zealand owing to its maritime climate, where a long ripening period results in a balance of acidity and flavour development.
China isn’t often associated with wine. However, much of the country sits in the latitude where wine can be produced, and in recent decades the country has acquired a taste for the drink. In one Interview, a specialist talks about the troubles the wine industry there has encountered. The market was at its peak in 2016-17, but a weak economy contributing to flagging consumption and the crackdown on state officials’ spending have contributed to sluggishness since. In addition, there is an inventory backlog owing to “inaccurate market evaluation”, which has led to large quantities of wine being dumped on the market in H2 2018 and H1 2019.
Although lower-end wine still has a place, owing to uneven purchasing power across the country, Chinese consumers are becoming more interested in quality. Some imported wines that do well in the Chinese market include Treasury Wine Estate’s Rawson’s Retreat, Concha y Toro’s Casillero del Diablo and Yellow Tail. Moreover, “domestic wine is becoming more popular in China’s wine distribution market.” Distributors are becoming more willing to purchase domestic wine owing to higher market recognition, the fact that it’s easier to promote and its improving quality. Despite growing interest in domestic wine, Chinese production has been dropping since 2013 – which could be a result of the overall downward trend caused by economic and regulatory factors.
American alcohol consumption is also changing. And, in one specialist’s words, “there’s probably more disruption or changes now than there have been in an industry that has been fairly stable since the repeal of Prohibition in 1933.” One of the forces behind this is changing preferences. Just like in New Zealand, American consumers are becoming more health conscious. Hard seltzers, such as White Claw, are part of this move, with consumers after lower-calorie, lower-carb drinks. Another shift that has been taking place is in routine drink choices. People are more likely to make choices depending on the occasion rather than having a particular beverage they consume all the time. For instance, wine would be chosen to go with dinner, hard seltzers by the pool, and spirits for a night out. In fact, “more consumers are now drinking across categories than they ever have before”.
Regulation is also in the works which will shape how states can sell alcohol to other states. One of the most significant modern cases was Granhom v Heald in 2005. This took place in Michigan, where a law benefitting in-state suppliers was challenged – Michigan was allowing its producers to ship wine out of state, but out-of-state suppliers were not allowed to sell their products in Michigan. The Supreme Court ruled that discrimination was not allowed; now, 45 states allow wine to be shipped. More recently, in 2018 the Supreme Court ruled on a Tennessee case on “whether or not the state could discriminate against retailers out of state in favour of retailers in-state.” Last year, it ruled that “a state can discriminate in the case of public safety and health or other legitimate purposes, but without those purposes, just pure economic protectionism, a state cannot discriminate.” This means that a state could have requirements regarding ownership of retailers, for instance they have to be a resident of that state or a percentage of the wholesaler is owned by a resident.
Although there may be regulatory and macroeconomic hiccups in some regions, transitioning tastes should be no cause for concern. Understanding what’s changing now – and why – can help us anticipate what consumers will hunger for next.
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