The value of grapes is at a tipping point, with growers and winemakers starting to make the hard call to pull out some vineyard blocks and replace them with other crops.
Nelson Winegrowers chairman Blair Gibbs says an oversupply of grapes is now a major concern for an industry facing declining wine consumption and poor returns, prompting decisions around land use change.
“It is an industry that is certainly not flying.”
He has heard, anecdotally, that there was a significant amount of fruit left on the region’s vines this past harvest, with some blocks mothballed throughout the season to limit intake.
“If your contract or partial contract is not enough to cover your costs of spraying your vines and pruning and canopy management for the season, then it’s not worth doing it.”
During the vineyard boom of the 2000s and early 2010s, vines replaced other land uses in places like Marlborough and the Waimea Plains. Now, as the baby boomers who grew up with wine age, younger generations are drinking less alcohol, and when they do choose a drink, there is a much wider range of alternatives – alongside cost-of-living pressures.
Added to less wine consumption is alcohol excise, which Blair says adds a significant cost when wine is already struggling to compete.
“Industry is taxed pretty heavily and that’s relentless. Now the value of the grapes in that bottle is less than the tax.”
Nelson-Tasman wineries with a cellar door have the ability to capture full margins on their wine, and Blair says the region’s tourism is in a good state, with growth in international and domestic visitors. For others, it has been a struggle.
“The survivors are the large corporate entities. But even they are struggling, and the multinationals are starting to sell off their New Zealand assets where they can and mothball them rather than pick the grapes. Internationally, the numbers are pretty challenging as well because every other grape-producing region in the world has the same issues that we have.”
The trend is already playing out locally. Last year, New Zealand investment manager Booster Group announced through NZX that it was redeveloping 46ha of existing vineyard land on the Waimea Plains to a multi-variety apple orchard, saying the move ensured the land would be put to its highest and best use.
Blair says that many smaller wineries in the region are “ma and pa operations” with no succession plan, and some are being wound up due to poor returns.
Changing land use is not new and has been happening in the region for more than 100 years between horticulture crops.
“The good thing about Nelson in some respects is there’s a multi-land-use model out on the Waimea Plains and the hills. It has the infrastructure and the climate to have the ability to switch to other horticulture products.”
