Winemakers toast 2020 harvest
Global lockdowns closed bars and eateries but vintners’ key markets held up, backed by huge online demand
Heavy demand for one lockdown essential — wine — has been a godsend for New Zealand’s listed wine companies.
Restaurants and bars may have been closed in unprecedented numbers across the globe, but New Zealand’s wine exports were up even as the country’s vintners implemented strict health protocols to stop the spread of Covid-19.
Grape picking was already under way when New Zealand went into a full lockdown to stop the virus in its tracks, threatening to slam the brakes on at a key moment for the 2020 harvest.
Fortunately, both production and processing of food and beverages was deemed “essential”, meaning the harvest could continue under strict rules.
“This meant that we could continue with our harvest operations, albeit with extra precautions in place,” said John Freeman, managing director of Delegat, New Zealand’s largest listed winemaker.
“The main challenges were reworking a number of our harvest and winery procedures to ensure we minimised the risk of spread.”
In early April, Delegat said the 2020 harvest was up 7 per cent at 38,129 tonnes.
They weren’t alone.
“The 2020 vintage will be remembered as one of the best vintages in recent years, and also how the wine industry adapted to operate under alert level 4 with a focus of keeping people safe and getting the job done,” said Conan Wang, operations manager for O:TU winemaker, Marlborough Wine Estates.
There were also silver linings, such as a smaller cold and flu impact on harvest teams.
Wine exports held up well through lockdowns in key markets of Asia, Europe and North America.
Stats NZ figures show wine exports in the 12 months to April hit $1.9 billion, up 8.5 per cent. In April alone they were up 15.8 per cent at $164 million.
MWE’s Wang said while China’s trading conditions were negatively impacted by Covid-19 earlier this year “we are still receiving consistent orders from our distributor in China. We will continue to work with them to find more growth opportunities in China.”
Still, the world’s most populous nation remains a relatively small market and New Zealand Winegrowers chief executive Philip Gregan said the strong rise in April likely reflected “pantry stocking” in the US.
New Zealand exports more than $600m of wine a year into the US and through the lockdown “the sales in the US have certainly been strong”.
Gregan noted that it’s the big firms that benefit. And for those winemakers, online sales have proven fruitful.
“In many markets around the world, consumers who have been unable to frequent bars and restaurants have continued to purchase wine as an important part of their lifestyle via retail and e-commerce,” Delegat’s Freeman said.
For example, Oyster Bay performed extremely well in the US on e-commerce platforms Drizly and Minibar, he said.
The brand’s strong position in chardonnay, pinot noir, and pinot gris varieties, as well as sauvignon blanc, was also a help.
“Brands that are well known and highly trusted have performed well, which is less about tactical moves in response to Covid-19, and more about having built up a strong position in the minds of consumers over many years,” he said.
Wang said MWE is still on track to report its maiden profit as a listed company this year, but he warned the biggest challenge from Covid-19 will be the recession.
“The wine industry can be cyclical, so the overall growth trend of the wine industry may be affected for the coming years.”
IHS Markit has forecast the US economy would shrink at an annualised rate of 37 per cent in the second quarter while economists are also predicting a dire contraction in New Zealand.
Gregan said the smaller wineries will feel a harsher hit domestically.
“Those which are dealing with restaurants, specialist wine trade, selling through the cellar dollar tend to be smaller wineries and obviously sales in those avenues are down considerably,” he said.
“There aren’t going to be as many people through the cellar doors. Our wineries need to adjust to that new environment.”
Wang said it’s about survival of the fittest.
“In a difficult time like this, the strongest will survive. Our company has a strong foundation for growth and we believe we will emerge from the Covid-19 situation and recession stronger than ever,” he said.
Freeman said it was tough to predict how things would unfold.
“We have fared reasonably well in the short term while this pandemic has impacted people all over the world.
“But like most organisations, we do not have an ability to predict what the future will hold for us or our industry,” he said. “What we can do is remain focused on our long-term goals, create and execute rigorous business plans, and be prepared to respond to what develops in the . . . years ahead.”
Like most organisations, we do not have an ability to predict what the future will hold for us or our industry.
John Freeman, Delegat