By: Mike Hosking | Monday, April 02, 2012

Part of the reason this country has avoided so many of the global effects of the downturn is that we sell stuff people want - dairy, meat and wine.

Wine is a brilliant story. Over a comparatively very short period of time our markets and sales have exploded. But there are two major problems. Firstly, too much of our income is earned from one grape – sauvignon blanc. Secondly, too much of our wine is sold to one market – Britain.

This has been an issue for years and despite the fact we continue to defy gravity and the dollars keep rolling, it can’t and won’t last. We have yet to find something to replace both the grape and the market in terms of size and sales.

Then there’s the new problem – bulk wine. We’re increasingly selling cheap bottom end wine in massive plastic bags. In fact bulk wine sales have gone from 5% five years ago to 40%.

This is perhaps a greater mistake that relying on one grape and one market. Why? Because the more of the rubbish we sell, the more it damages our reputation at what we actually do well and what we’ve make our name at. Top end boutique product that the collector and enthusiast is happy to pay top dollar for.

The world is awash with cheap wine and we can never hope to compete in the market because it’s driven purely by price. When it’s only driven by price, the big producers like Chile, Australia and South Africa will undercut us every time. They make more, they sell more, they can trim their margins way more than we ever could.

It’s a race to the bottom. It’s a race we’ve make a big mistake in entering. The Great producers of this country – the Stonyridges, Felton Roads, Dry Rivers, Te Matas, Vinoptimas, Villa Marias – they don’t play this game. They don’t have to. They’re a growing number of talented players making globally significant wine that sells for top money. In fact many of them have greater demand that they have supply. That is the future of the New Zealand wine industry, or should be.

Given our size and location, mass production is commercial suicide. Australia went down that track with their cheap, sugared up rubbish they tried to dump on the American market, and they’ve paid for the past decade or so a dreadfully high price. We’d be mad to replicate it.

No one’s done it better than the French. The French understand quality and position. They understand branding and production. The greatest, most desired and highest priced wines in the world are French. That’s the moedel to follow. The future is not, nor has it ever been, in 24,000L plastic bags.