As I’m writing this, my D2 Wine Business exam looms. Most likely, by the time this goes live, I’ll have already sat the exam and be blissfully ignorant of the results. That being said, because of my D2 studies I am noticing more and more places where the material pops up in my D3 Wines of the World studies.
So, let’s take a look at how wine law, regulations, organizations, sales and marketing all take shape on the islands of New Zealand…
Before jumping in here, please take a look at the New Zealand Overview, North Island, and South Island articles first.
For a simplified version of this material, please see the original Wine Region Overview: New Zealand. (More suited for WSET Level 3 Studies.)
WOOHOO! — There are no strict appellation laws and growers are free to plant whatever they like wherever they like without yield restrictions or regulations on vineyard establishment or management.
BONUS POINTS: That freedom extends to the cellar, where a lot of up-and-coming, modern winemakers are experimenting with different types of winemaking techniques to bring new styles to classic wines. (I’m looking at you Sauvignon Blanc.)
This proves a major advantage for New Zealand producers, who can pivot to meet market demands, cater to modern consumers, and/or be free to experiment in an effort increase quality and, thus, the reputation of the region as a whole.
But freedom comes with a cost. Lack of restriction, namely on yields—and especially when predominantly working with a vigorous variety (I’m still looking at you Sauvignon Blanc) means that the threat of a grape glut and subsequent devaluation on grapes and, thus, wine, can be an issue. In fact, according to the Oxford Companion to Wine there was, indeed, a great grape glut on 1983 that resulted in just that devaluation. So, in 1986, the government intervened with a vine pull scheme, reducing the country’s total plantings by about a quarter.
[Vine pull scheme: a government initiative to reduce the number of vines planted in a specific region or the country in general. It’s usually put in place to control yields and create a balance between the business of supply and demand and, as a result, prevent the devaluation of both grapes and wines. It’s been employed in several EU regions and, following California’s grape glut in 2019, many wondered if something similar shouldn’t take affect here. In some cases, the government will actually pay farmers to pull their produce.]
Similarly, the early 2000s saw a dramatic increase in small wine producing companies. Methinks it’s because by this time growers were much more educated on site selection and canopy management techniques that the quality of wines being produced were finally being recognized both in and outside of the country. Thus, people jumped on the wine-wagon. But two things happened: 1) there was yet another grape glut in 2008 and 2) the 2008 global financial crisis. Land prices are not cheap, particularly if you are/were planted in the country’s claim-to-fame Marlborough or are/were a small producer taking a chance on challenging vineyard slopes. Many small producers could not survive the combined hardships and, as the Atlas of Wine (8th edition) says, many growers left the grapes unharvested and the total number of growers fell from 1,060 in 2008 to just over 700 in 2018.
The Atlas further notes, however, that the number of wineries has since slowly increased over the years and “thanks to the economics of scale” contract winemaking proves popular and profitable, thus many growers have a brand/label, but no winery of their own.
Although there are no appellation laws, in 2017 the Geographical Indications Act was created, which registers names of wine producing regions to ensure that those names are protected overseas. According to my text, as of 2018, there are 18 names registered, including Marlborough, Martinborough and Hawke’s Bay. This same act protects the status of outside GI’s inside New Zealand (such as Prosecco).
Appellation Marlborough Wine was established in 2018 specifically protecting the Marlborough region’s reputation in the export market. NOTE: THE TRADEMARK ONLY APPLIES TO SAUVIGNON BLANC. Further, the wines must be made entirely from grapes grown in Marlborough, New Zealand with an agreed-upon maximum yield, vineyards must be certified sustainable and the wine must be bottled inside New Zealand.
From a D2 perspective, it makes sense that a region with such a high volume output and large export market would want to highlight the best of the best growers and producers who take these extra attentions to detail. However, note that wines must be bottled inside Marlborough, thus will be shipped in bottle—a lot more expensive than shipping via bulk container and bottling on location. (Which actually most New Zealand wine is. See below.)
This is an important piece of business expense to factor in, as overseas markets are extremely important. According to my text, the country produces about three million hL of wine annually—but domestic sales only make up about one-sixth of total sales. The largest export markets are the US, UK, and AU and in 2019, total export sales exceeded $1.8 billion (NZD). As stated previously, the majority of exports is, indeed, Sauvignon Blanc, representing 86% of all exports.
As I noted in the New Zealand Overview, New Zealand is only responsible for 1% of the world’s wine by volume, but with such an extensive export market (ranking 10th in the world in terms of wine volume), bulk shipping has, in fact increased. As I alluded to earlier, this is a much cheaper method, can transport more than double the amount of volume than shipping in bottle, and is more environmentally friendly (as most containers are re-usable and because shipping in bulk is lighter, uses less fuel). Today, one-third of all New Zealand‘s wines are shipped in bulk. As my text points out, this parallels an increasing trend for in-market bottling (i.e. the importing market bottles the wine upon arrival).
Inside New Zealand, domestic sales are most prevalent in supermarkets, hospitality spaces and specialist/niche wine shops. It’s also noted that a large majority (85%) of wine brands utilize cellar door sales.
Cellar door sales is a term not much used in the U.S. Instead we tend to use the collective term “tasting room” to cover all forms of in-house hospitality. Cellar door originally literally meant that wineries open up their cellars to sell to the public. Today, some wineries do have specific wine tasting areas (tasting rooms), but still refer to it as the cellar door. Similarly, some wineries opt to have their “cellar door” in a nearby town with better foot traffic (like downtown Sonoma or Napa). Having a remote location also benefits the producer if the winery facility does not have enough space or staff to tend to guests.
When it comes to marketing (defined as the process of identifying, anticipating, and satisfying consumer wants and needs), the group known as New Zealand Wine coordinates marketing efforts of the country’s wines. They create opportunities and events for key influencers to visit and truly experience the country’s wine industry. (Footnote: In a non-COVID world…)
Because of these marketing efforts and the country’s ability to get its wines in a wide range of market spaces, New Zealand has a global reputation for high quality wines that, my text notes, most consumers are willing to pay “above average” prices for. And while there are those experimental producers creating new expression of the country’s heritage grape, it’s also noted that the “pungent, intensely aromatic, high acid, un-oaked style,” are still the most desired by consumers.
Though there are not as many notable “big brands” as in other countries, New Zealand‘s smaller producers utilize and benefit from, what in D2 is referred to as, “soft branding.” Soft branding means using visual cues that signify to the potential consumer the type of wine inside the bottle. This can be something as simple as the name of a region with a notable reputation (i.e. Marlborough Sauvignon Blanc) or, as is the case with many New Zealand wines, imagery that showcases the natural beauty of the landscape. As noted in each New Zealand article thus far (New Zealand Overview, North Island, and South Island), the country is known for its lack of pollution and ability to cultivate grapes sustainably and, in some cases, even organically and/or biodynamically.
This “soft” brand image of environmental awareness is further enforced through the country’s commitment to sustainable viticulture: 98% of all grape growers participate in the country’s sustainability program, Sustainable Wine New Zealand.
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Educational posts are in no way intended as official WSET study materials. I am not an official WSET educator nor do I work for a WSET Approved Program Provider. Study at your own risk. Read the full disclaimer.