Rabobank focus on New Zealand

In the black with blanc

The latest Rabobank report focuses on New Zealand. It comments on NZ’s remarkable growth but looks to the future and how the Kiwis will cope. Reading the report, it quickly becomes clear NZ wines will continue to do very well. But not all producers will benefit.

According to Rabobank: “All [consumers] seem to be willing to pay up for more expressive and lighter-bodied wines.” The majority of NZ wine is sauvignon blanc. We can understand the “lighter-bodied” description but “expressive” doesn’t gel with us.

However, it doesn’t matter what we think. It’s consumers’ perceptions that matter, and Australian wines are viewed as rich and heavy, which in not in fashion at the present time.

Rabobank say the growing role of women and younger generations in wine buying will keep the NZ wagon rolling. The report concedes demand will plateau at some point, citing Australia as a market that has reached its potential for NZ wines. It also points out the consolidation of NZ wine into larger companies. Where will the smaller producer fit?

Like Australia, NZ is reliant on too few markets. The chart below shows the change between 2010 and 2015. The US has overtaken the UK as number one, but the consolidation of US distributors has worked against the smaller NZ producer. As has the amount of suitable land in the main regions for new plantings, with the large companies domanating.

NZ 2010-15

The big brands in the US are:

Big US brands

According to Impact Databank figures there were three New Zealand brands in the US’s top 10 imported premium wines in 2015:

  • 2: Kim Crawford, owner Constellation Brands, 955,000 nine-litre case sales
  • 7: Oyster Bay, owner Delegat USA, 629,000 nine-litre case sales
  • 8: Nobilo, owner Constellation Brands, 560,000 nine-litre case sales

Rabobank points out that Marlborough sauvignon blanc is a favourite grape with producers as it offers large yields of high quality fruit that is “efficiently processed through a relatively uncomplicated process, leaving wineries ready to recoup their working capital in no time flat, as stocks hit the market in the months following harvest”.

The warning is that being too reliant on one variety may backfire one day.

Australia not premium

Unfortunately there are no Australian brands in the Impact Databank top 10 imported premium wines by volume in the US. Premium is considered to be wines that retail over US$10 ($13.12). The 2015 total for all imported wines was about 67 million cases, down 0.5 per cent on 2014, but the premium sector (excluding prosecco) increased 4.5 per cent to 16 million cases. The top 10 list:

Top 10

Petit saint

Washington State-based Ste. Michelle Wine Estates is a small part of the giant Altria, which in the main is a tobacco company, its largest brand being Marlboro. In first quarter of 2016 what the company terms “smokeable products” increased in sales 3.8 per cent to US$5.42 billion ($7.11 billion).

The wine segment is small in compression. Ste. Michelle Wine Estates, which includes Chateau Ste. Michelle, Columbia Crest, 14 Hands and Stag’s Leap Wine Cellars, increased sales by 8.2 per cent to US$145 million, returning a profit of US$28 million. Volume rose 8.1 per cent to 1.85 million cases.

Altria also holds a 27 per cent stake in SABMiller, which is in the process of being taken over by Anheuser-Busch InBev. When this comes about, Altria will have 10.5 per cent equity interest in the combined company and receive about US$2.5 billion in pre-tax cash. It also gets two seats on the new company’s board of directors.

Leave a Reply

Your email address will not be published. Required fields are marked *