Pinot set to join trans-Tasman sauvignon pipeline

Have you heard about the trans-Tasman sauvignon blanc pipeline to Bondi? Neither have I. But we’re swimming in the stuff and the tap’s not about to be turned off. In 2009 New Zealand exported 43.8 million litres (equivalent to 4.9 million dozen bottles) of wine to Australia. About ninety per cent of that was white wine, the majority of it sauvignon blanc.

The New Zealanders began planting sauvignon like crazy decades ago, sprinting to keep up with an insatiable international thirst. While the GFC imposed a momentary pause, exports began to gush again in 2009, albeit at the expense of producer margins.

With little capacity to move an estimated 30-million litre surplus domestically, New Zealand vignerons simply slashed prices – and international buyers opened their order books. Exports flooded out, accelerating in late 2009, possibly to create storage space for vintage 2010.

Exports to Australia, New Zealand’s biggest market, grew 40.9 per cent from 31.1 million litres in 2008 to 43.8 million litres in 2009. But the growth came at considerable cost to vignerons, as the price per litre fell 21.6 per cent, from $NZ9.53 to $NZ7.57.

Similarly, volume to the United Kingdom leapt 30.3 per cent from 31.1 to 41.2 million litres while the price per litre fell 17.2 per cent to $NZ6.74 from $NZ8.14. Running against this trend, Americans and Canadians imported greater volumes and paid more per litre. But Germany, Denmark and the Netherlands drove producer prices down significantly.

In Australia, the lower buying prices and proliferation of brands, many created by retailers and wholesalers, quickly translated into greater shelf, fridge and floor space and significantly lower retail prices.

While this no doubt expands the market for New Zealand sauvignon blanc, much of it is at unsustainable prices – the result of sheer distress. This creates a serious dilemma for well-established producers. They may have spent years building the Marlborough brand, suddenly to find customers becoming competitors and dozens of opportunistic labels cashing in cheaply on the good will they’ve created.

These operators don’t have the marketing overheads of leading brands, so little wonder we’ve seen prices plunging to all-time lows – dragging the strong brands along, too. We should lap it up while we can – perhaps for another few years — but eventually supply and demand will realign and prices will once again reflect the cost of production.

And as the focus shifts from bargain-basement sauvignon blanc, we might notice just how much bubbly and pinot noir we’re shipping across the Tasman. It’s not enough to fill the Bondi pipeline – but these are top-end wines. And pinot noir, now in its infancy, could create a new market much as Marlborough sauvignon blanc did – gradually during the eighties and nineties, then dramatically this century.

And I’m backing Marlborough to lead the charge again. It remains by far the largest of New Zealand’s wine regions, accounting for 16,682 of its 31,057 hectares of vines. Hawkes Bay comes a distant second with 4,928 hectares. The much talked about Otago region has just 1,540 hectares, albeit more narrowly focused on pinot noir and chardonnay than Marlborough.

But for all the talk of Central Otago and Martinborough pinot noir – and these are creating New Zealand’s international pinot image – Marlborough is the variety’s engine room. It’s the biggest producer – but almost certain can almost certainly equal the quality of pinots coming out of Central Otago and Martinborough.

In Canberra last, New Zealand winemaker Matt Mitchell said that some Marlborough vignerons worried that by focusing on cheaper pinot, rather than cutting edge stuff, the region might already have typecast itself as a bulk producer.
In fact, Marlborough has a unique opportunity with pinot noir. It has already created a market from virtually nothing  and is now the leading player in Australia’s pinot niche. In the year to June 2009, the New Zealanders exported four million litres of red to us, the majority of it pinot noir, at a value of $NZ9.07 a litre).

Even ten years ago we barely had a beverage pinot noir market in Australia. With the exception of a tiny minority of top-end wine drinkers, Australians held deep suspicious of the variety – and for good reason. Most the cheaper ones of the time tasted more like rose than red wine.

Marlborough converted us, through popular wines like Oyster Bay, Montana and Stoneleigh, to a belief that lighter, elegant pinot can be a decent red. It doesn’t have to lack substance.

After the dust settles on the current wine surplus, watch for New Zealand, led by Marlborough, to take pinot to the world. It’s set to become the sauvignon blanc of red wine.

Copyright © Chris Shanahan 2010

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