Covid-19 a big hit to small wineries

“We don’t want to be referenced as a one stop shop for large retail brands,” says lead author Alistair King, a wine industry specialist with accounting firm Findex. “New Zealand needs to maintain a diversity of offerings and rich ecosystems of wineries.”

Covid-19 Wine Industry Support was commissioned by the Ministry for Primary Industries, to consider what can be done to protect vulnerable smaller wineries from failing as a result of the pandemic, prioritising the most efficient, feasible, cost efficient, and promptly deployable options. 

Alistair and his team interviewed representatives from 17 small companies across New Zealand’s main wine growing regions. Many of them began the 2021 financial year with budgets anticipating deteriorating trade over the next 12 to 18 months, despite operating successfully before Covid-19. Given the pressure the pandemic has placed on those viable businesses, more marginal wineries will be struggling “to a far greater extent”, the authors warn.

The dramatic decline in the on-premise wine sales channel has had a significant impact on small, premium wine brands reliant on that trade. This segment struggled to access major grocery and off-premise chains before Covid-19, and that has become even harder throughout the pandemic, says the report. It highlights the production split in the New Zealand market, with Sauvignon Blanc accounting for 76 percent of New Zealand’s production and 85 percent of its wine exports. The remaining 24 percent of production is dominated by higher cost and higher price varietals, made by smaller wineries. “These varietals are growing in inventory and are in a potential oversupply situation” says Alistair.

Looming labour shortages, due to border closures, were another major challenge, as was the need for digital tools for communication and as a pathway to the consumer, says the report. 

“Reliable high-speed internet connectivity has never been more critical, as lockdowns required wineries to focus on direct to customer channels, which relied heavily on website-based sales platforms, video conferencing and digital data upload.” However, many of the companies spoken to for the report said they lacked the time and money to make any significant investments in digital.

Possible remedies include continued support of domestic tourism and buy local campaigns, and the opportunity to raise awareness among New Zealanders of the quality of New Zealand food and beverage products, the report says. “This would help wineries maintain margins on domestic sales through a far greater appreciation of the value of our locally produced food and beverage products.”

Companies interviewed also believed increased support to streamline logistics and international supply chains would help them weather the storm created by the closure of the international tourism market. “Smaller wineries we spoke to who need to sell direct to consumer are faced with direct shipping post order, which is slow and at a high cost per unit or scrambling to arrange the correct distribution channels in export markets,” says Alistair. 

A collaboration between New Zealand Trade and Enterprise and industry could be explored, “to provide compliance and logistical support in key export markets to allow smaller New Zealand food and beverage producers to market direct to consume and ship from dedicated localised warehousing quickly direct to market at higher margins”, the report says.

Small wineries have a critical role to play in an economic recovery, particularly across rural and regional New Zealand, says Alistair. “This will only be possible if wine businesses survive the short to medium term cashflow threats they are facing and are able to maintain productivity.”

New Zealand Winegrowers (NZW) External Relations Manager Nicola Crennan says the report findings are “on point” and summarise what the industry body has been hearing from members. Speaking at a webinar after its release, she said NZW was working within a Labour Action Plan to make wine “the industry of choice” in New Zealand (see page 26). The advocacy team has been engaging with Government agencies, other horticultural bodies, regional wine bodies and wine schools to ascertain the extent of labour challenges and to find the workers needed for the coming season. 

NZW Marketing Manager Charlotte Read, also in the webinar, said NZW is supporting domestic tourism initiatives and Buy Local, and had its own Visit the Vines campaign. The marketing team had been successful in “storytelling” around New Zealand food and beverage, with good uptake by journalists here and abroad. NZW is working closely with New Zealand Trade and Enterprise, and looked forward to the launch of the Made with Care food and beverage campaign, Charlotte said.

To see the webinar, go to nzwine.com/members/marketing/webinars