VITICULTURE
Research
property
Annual 2013
www.bayleys.co.nz
VITICULTURE NEW ZEALAND KEY TRENDS
EXPORT INCOME
GRAPE HARVEST
MARKET CONDITIONS IMPROVING
The mood of the viticulture industry is one of cautious optimism. It
is felt that the worst of the global recession is over, lower vintages
have resulted in a better alignment between production and sales,
the Chinese export market is expanding and the 2013 vintage is
tipped to produce some extremely high quality wines.
Market activity is lifting, driven by the larger beverage companies
which face a requirement to source sufficient grapes to meet their
contractual supply agreements while also searching for scale in
order to compete more effectively in export markets. The minimum
lot size considered by such companies is 20 hectares which is
generally regarded as the smallest plot which can be considered
a stand alone unit.
The combination of the above influences is leading to consolidation
within the industry. The long term result will be that many of the
current mid sized wineries will be absorbed by the large beverage
companies, splitting the industry to a far greater extent than is
currently the case, between boutique producers and the large
corporates.
Grape prices, which have fallen over recent years, are now
recovering, again a result of a better supply / demand balance.
Given the anticipated quality of the 2013 vintage it is forecast that
wineries, in 2013, will pay growers an additional $400 per tonne
over and above what they received in 2012. In Marlborough in
particular the increase will have a flow on effect for the community
with the expected harvested crop of 200,000 tonnes injecting an
additional $80 million into the economy.
Export growth is the key to the New Zealand industry expanding
given the limited scope for growth within the local market.
Export volumes have continued to grow despite the economic
downturn and this growth looks set to be bolstered by the rapidly
expanding Chinese market if the New Zealand industry can find a
way to secure distribution channels.
LAND VALUES
Access to export markets can be assisted through overseas
investment within New Zealand wineries. In many cases however
potential overseas buyers, in a competitive buying situation, are
being hampered by the Overseas Investment Office (OIO). While
outright rejection by the OIO is rare, time delays caused by the
process often means that vendors opt for a faster sale to a
domestic operator despite the fact that they may not be the
highest bidder.
The global economic downturn resulted in many consumers
trading down in terms of the value of wine which they purchased.
This has resulted in a rise in bulk wine sales which does not fit with
the New Zealand industry given its lack of scale. The local industry
is therefore, better placed to compete on quality as opposed to
quantity. The 2012 vintage benchmarking survey conducted
by Deloitte found that “case sales” were again increasing as a
proportion of export sales which could point to the fact that New
Zealand’s reputation for quality has avoided being damaged by
bulk sales over recent years.
STATISTICAL OVERVIEW
New Zealand’s wine industry underwent explosive growth during
the 2000’s with the number of wineries increasing from 358 in
2000 to 672 in 2010. The total production area grew from 10,197
hectares at the beginning of the decade to 33,425 by 2010.
By 2010 wine had become one of the country’s top 10 export
earners generating $1,041,000,000 in overseas sales, up from
$168,600,000 in 2000.
By 2010 however, the impact of the Global Financial Crisis (GFC)
had become apparent with the average value of grapes having
fallen from a 2008 peak of $2,161 per tonne to $1,293. This had
a significant impact on land values with prime Marlborough land,
NEW ZEALAND WINE STATISTICS
Wineries / Wine Companies
Producing Area (hectares)
Average Grape Price ($/tonne)
Total Production (millions of litres)
Domestic Sales of NZ Wine (millions of litres)
Total Sales of all Wine (millions of litres)
Export Volume (millions of litres)
Export Value ($ millions)
2000
2001
2002
2003
2004
2005
358
10,197
$1,195
60.2
41.3
66.2
19.2
$169 382
11,648
$1,396
53.3
36.2
66.6
19.2
$198 398
13,173
$1,627
89
32.2
68.3
23
$246 421
15,800
$1,929
55
35.3
74.5
27.1
$282 463
18,112
$1,876
119.2
35.5
79.7
31.1
$303 516
21,002
$1,792
102
45
81.7
51.4
$435 which had been transacting at between $250,000 and $300,000
per hectare, falling to $130,000 per hectare.
The downturn in land values and an oversupply of wine, brought
about by falling global sales and record vintages saw new vineyard
development entering a hiatus with there having been no addition
to the production land figures since 2010.
CHINA EXPORT MARKET EXPANDING
New Zealand wine exports, driven by the international success of
Marlborough Sauvignon Blanc, have increased significantly over
the last decade. As shown in the table above, the annual value of
exports reached $1 billion in 2010 having sat at just $169 million
in 2000.
WINE EXPORTS TO CHINA
NEW ZEALAND WINE PRODUCTION
2,500
Litres
$30
$NZ
200
$25
2,000
1,500
$10
Source: New Zealand Winegrowers
WINE PRODUCING REGIONS - HECTARES
Source: New Zealand Winegrowers
2012
2011
2010
2009
2008
2007
2006
$5
2005
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
500
2002
0
2001
1,000
2000
50
$15
2004
100
$20
2003
Litres (000’s)
150
NZ$ (Million)
Total Production (litres, millions)
250
$0
Source: New Zealand Winegrowers
Growth in income has, however, been driven in recent years, by
volume as opposed to value. In 2012 the average sale price of
wine was $6.58 per litre compared to a peak value of $10.71
achieved in 2002. The reduction in values is a consequence of
the GFC which led to consumers trading down to less expensive
wines and to the oversupply of wine, a result of large vintages,
particularly in 2011 when a record 328,000 tonnes were crushed.
This also resulted in a higher proportion of wine exports being bulk
wine sales as opposed to bottled wine which carries a premium
value.
In 2012 however, the vintage was greatly reduced with 269,000
tonnes crushed bringing a greater balance to the market.
RECENT SALES
LD
SO
Waikahu Vineyard, Hastings
8.8 hectares/ Chardonnay, Syrah & Merlot|
Supply Contract with NZ wine company|
Frost Protection| Water Supply|
House and Improvements included| Sale
Price $1,310,000| Price $/ha $148,860
LD
SO
Awatere Road | 91 hectares bare land|
Purchased for vineyard development |
House and Farm buildings included |
Dashwood Soil| Bought by Delegats |
Sale Price $3,250,000
Price $/ha $35,715
LD
SO
Tetley Brook Road Seddon
64 hectares| 49.5 ha Sauvignon Blanc|
427 ton four year average| Optional supply
contract| Awatere wine region|
Bought by Babich Wines| Sale Price
$4,470,000| Price $/ha $69,840
2006
2007
2008
2009
2010
2011
530
22,616
$2,022
133.2
50
86
57.8
$512 543
25,355
$1,981
147.6
51
91.8
76
$698 585
29,310
$2,161
205.2
46.5
87.4
88.6
$798 643
31,964
$1,629
205.2
59.3
92.7
112.6
$992 672
33,428
$1,293
190
56.7
92.1
142
$1,041 698
33,400
$1,239
235
66.3
93.9
154.7
$1,094 2012
703
33,400
$1,315
194
63.5
91.3
178.9
$1,177
Souce: New Zealand Winegrowers
Deloitte noted in its “Vintage 2012” report on the New Zealand
wine industry that exporters had also reported an increase in case
sales. This may have been the result of the smaller vintage but
could also indicate that demand for branded product is again on
the rise.
NEW ZEALAND WINE EXPORTS BY VALUE
All figures $NZ millions
Source: New Zealand Winegrowers
Bolstering the improving sentiment within the industry is the
growth of new markets for New Zealand wine, primarily China.
Traditional markets such as Australia and the United Kingdom
continue to dominate accounting for 62% of export sales by
volume and 56% of export sales by value in 2012.
It is however the Chinese market which shows the greatest
potential for significant growth over the short to medium term
future. Having been a minor player just ten years ago, when it
ranked as just New Zealand’s 14th largest export market, it is
set to move into fourth place within the next few years following
explosive expansion over the last decade.
In 2003 New Zealand vineyards exported just 16,000 litres to
China generating just under $210,000 in export earnings. The
period through to 2008 was characterised by steady rather than
spectacular growth with export volumes climbing to 544,000 litres
equating to $6,130,000 in earnings. Subsequently, growth has
accelerated with New Zealand Winegrowers reporting 2012 sales
to have reached 2.2 million litres with a value of over $25 million.
While there is no doubt that the Chinese market offers huge
potential, a number of difficulties need to be overcome if this
potential is to be fully met.
The major problems are the question of scale and the securing
of distribution channels. Up to now Chinese wine drinkers have
shown a strong preference for red wine. Unlike Sauvignon Blanc,
which is produced in large quantities red varietals are largely
produced at the more boutique level, although recent years has
seen expansion within Pinot Noir production.
Establishing a secure distribution network is another issue to be
considered. A majority of export agreements secured to date have
arisen as a result of a direct approach from a Chinese buyer to a
single vineyard. The issue is further complicated by the fact that
export regulations differ between provinces, in effect making each
province a separate market. A similar problem faced by companies
that have targeted the United States.
Given the above, it is likely that the potential for China can best be
unlocked through negotiations being progressed though an industry
body or alternatively by groups of vineyards which, between them,
can meet the requirement of scale and share the costs involved in
opening up a wider number of distribution networks.
As has been the case with other markets, an element of overseas
investment within wine production companies could also be of
benefit in securing easier access to Chinese markets.
RECENT SALES
LD
SO
St John Estate, Hastings| 9.7 hectares|
Cabernet Franc, malbec, Merlot, Syrah|
Older two storied home included| Sale
price $1,250,000| Price $/ha $128,865
LD
SO
Shandon Road Waihopai Valley| 7.75
hectares| Lifestyle property|
5.5 hectare producing vineyard| Sauvignon
Blanc| Water bore| House, sheds, staff
accommodation included| Sale price
$1,280,000| Price $/ha $165,160
LD
SO
Raupara Road, Marlborough| 26.3
hectares| Sauvignon Blanc, Pinot Noir|
Underground water rights and irrigation|
Grape supply contracts| House, implement
shed and storage shed included| Sale
price $3,700,000| Price $/ha $140,685
RENEWED CONFIDENCE SEES VALUES FIRM
Market trends within the Country’s two largest wine making
regions, Marlborough and Hawkes Bay, have been very similar
over recent years despite the differences between them in terms
of scale and differing emphasis on the variety of wines produced.
In both regions land values peaked in 2007 / 2008, new vineyards
were being developed and the average value of grapes peaked
at over $2,100 per tonne. The onset of the GFC, which resulted
in consumers “trading down” and coincided with a succession of
large vintages, saw land values fall as grape prices fell and new
vineyard development halted.
A reduced vintage in 2012 saw the wine glut being pared back. In
addition, although the average value of wines being sold fell post
GFC, export volumes continued to increase as bulk wine sales
grew. As a result wine producers came under increasing pressure
to secure sufficient grape supply to meet their contractual
obligations. This has led to a number of the major beverage
companies returning to the land market in order to secure supply.
The above dynamics have led to grape prices increasing for the
first time since peaking in 2008 and land values firming in the face
of increased purchaser inquiry.
Marlborough, at 19,570 hectares, is the country’s largest wine
producing region. Its soils and climate make it ideally suited for
growing Sauvignon Blanc grapes, the varietal which makes up
approximately 84% of New Zealand’s exports by volume. As a result,
prime land within the region’s golden triangle commanded, at the
peak, values as high as $300,000 per hectare although generally
falling in the range of $240,000 to $260,000 per hectare. Values
fell to approximately $130,000 per hectare, post GFC but recent
sales show prices to be recovering having fallen to within the range
of $150,000-$170.000 per hectare.
Hawkes Bay has only approximately a quarter of the production
area of Marlborough but is the country’s second largest wine
producing region. Most wine varietals can be produced within
Hawkes Bay, however, it is predominantly known for its Syrah and
Merlot wines. The more limited scale of the region, compared with
Marlborough, has meant that land values have been less volatile.
Land within the prime Gimblett Gravels areas fell to within a range
of $150,000-$170,000 per hectare, however values have now
returned to the pre GFC peak of $200,000+ per hectare.
In Hawkes Bay land values are supported by the fact that the
development of vineyards for the growing of red grapes has all
but reached its ceiling. While there is potential for some further
vineyard expansion the available land will not support red varietals.
MARLBOROUGH VITICULTURE LAND VALUE ($/HA)
Pre GFC Peak
Post GFC Trough
Current
$300,000
$130,000
$150,000-$170,000
South Valley
$170,000-$200,000
$100,000
$110,000-$120,000
Awatere
$140,000-$170,000 $90,000-$110,000 $110,000-$140,000
Blind River
$120,000-$130,000 $60,000-$80,000
Golden Triangle
$90,000-$110,000
Source: Logan Stone
HAWKES BAY VITICULTURE LAND VALUE ($/HA)
Gimblett Gravels
Ngatarawa Triangle
Pre GFC Peak
Post GFC Trough
Current
$200,000
$150,000-$170,000
$200,000
$90,000-120,000
$70,000-90,000
$90,000-$100,000
Source: Logan Stone
RECENT SALES
LD
SO
Swamp Road vineyard, Hawkes Bay
13.3 hectares| Chardonnay|
Irrigation consent| Pakowhai and
Omaranui soils| Plantings 1992-2001|
| Land would support alternative uses|
Sale price $701,111| Price $/ha 52,715
LD
SO
Ben Morven Road, Fairhall, Marlborough
8 hectares| Sauvignon Blanc|
Grape supply contract in place| Irrigation
supply|4 bedroom home included |
Sale price $1,368,000 |
Price $/ha $171,000
LD
SO
Paynters Road, Fairhall, Marlborough|
10.3 hectares| 4 hectare producing
vineyard| Grape supply contract| 4
bedroom house| 3 bay shed and large
barn included| Sale price $1,450,000|
Price $/ha $140,775.
BAYLEYS RESEARCH: FOR MORE INFORMATION CONTACT US:
<Bayleys Realty Group
Ph: 09 375 6868
Fax: 09 358 3548
<Bayleys Offices
Free Phone: 0800 Bayleys
(0800 229539)
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www.bayleys.co.nz
This publication is prepared by Bayleys Research. All opinions,
statements, analyses expressed are based on information from sources
which Bayleys Research believes to be authentic and reliable. Bayleys
issues no invitation to anyone to rely solely on the information contained
herein and intends by this statement to exclude liability for any such
opinions, statements and analyses.
Gerald Rundle
B.Com, B.P.A, Registered Valuer, ANZIV, SNZPI
Email: [email protected]
Ian Little
B.Sc (Hons), MRICS
Email: [email protected]
Sarah Davidson
BBS
Email: [email protected]
Scott Cordes
Communications Manager
Email: [email protected]
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