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Many would be shocked to learn that more than 80% of New Zealand’s winemaking industry is owned by offshore companies. The exact proportion of international ownership cannot be calculated but the “best guess” by expert observers puts the figure at 80-85%.
In June 2008 New Zealand had over 600 registered wine producers and an even greater number of vineyard owners. Six of those producers boast sales in excess of two million litres. They are Pernod Ricard NZ (part of the French spirits conglomerate that also owns the large Australian winemaker Orlando Wyndham), Constellation NZ (part of the world’s largest wine producer, Constellation, a US-based wine, beer and spirits group), Matua Valley (owned by Fosters Group which also owns Australian wineries Penfolds, Wolf Blass, Rosemount, Lindemans and Wynns), and three locally-owned companies Villa Maria, Delegats/Oyster Bay and Giesen. Pernod Ricard NZ is New Zealand’s largest wine producer by far with Constellation NZ in second place. Together these two companies account for well over half the country’s wine production.
While loyal wine buyers might be saddened to learn that the profit from their bottle of Montana Sauvignon Blanc or Nobilo Chardonnay will swell the earnings of a company in France or the US there are some positive aspects to overseas investment. The welcome injection of overseas capital has allowed New Zealand’s wine industry to expand at a rate that could not have been achieved without it. Demand for Marlborough Sauvignon Blanc has, until the 2008 vintage at least, significantly exceeded supply. There is little doubt that offshore investment has helped close the gap.
Perhaps the greatest benefit has been access to overseas markets through the not inconsiderable distribution of big players like Constellation, Pernod Ricard and Fosters. Of less significance is access to in-house technical skills afforded by joining a large international wine group.
Ross Spence and his brother, Bill, founded Matua Valley when they began making wine in a small tin shed north of Auckland. They built there business into a mid-sized winery with a reputation for innovation and excellence before selling it to Berringer Blass, now Fosters. Bill continues to work for Fosters while Ross Spence recently returned to grassroots winemaking. He is currently building a new tin shed and plans to make small quantities of wine from Tannat, Montepulciano and Petite Syrah.
“Offshore ownership is a bit of a curate’s egg – there are good bits and bad bits” said Spence with a grin. “It’s given New Zealand wine a much easier ride into important market places but I don’t think it has done much to elevate quality and continue the development of new styles and winemaking districts that have characterised the industry’s progress in the past. The focus has shifted from production to marketing. Overseas ownership has been good in the short term |
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by giving New Zealand wine a leg up into the global market but I’m not sure it’s going to be as beneficial in the long term. Large overseas-owned companies focus on their own needs and not on the needs of the wine industry or the country.”
Spence agreed that Pernod Ricard was probably an exception to that observation. In recent years Pernod Ricard NZ has made a great deal of investment into new vineyards in top areas and the overall quality of the company’s wines has increased significantly. The same cannot be said for Matua Valley or Constellation NZ.
Kim Crawford is another successful local winemaker who sold his business to Canadian company, Vincor, now owned by Constellation. Crawford continued to work for the new owners but recently resigned in fairly acrimonious circumstances.
“A number of internationally-owned wineries have adopted a “market share at all costs” Australian model. That has resulted in cost-cutting measures and the inevitable loss in wine quality. Pernod Ricard is the exception”, added Crawford. “I’m nervous about the affect that discounting is having on smaller producers who are having it increasing difficulty finding outlets for their wines.”
Crawford also expressed concern for the loss of potential local profits through transfer pricing. “Instead of selling a case of wine to the US for a market price of, say $100, wine is being sold to associate companies overseas for cost plus 10%, which might be $60, depriving this country of $40.”
Overseas ownership can bring many benefits to a small isolated country like New Zealand. However successful overseas ownership, like marriage, relies on the mutual consideration and respect of the investor with local interests such as employees, government and other producers. If one side starts to get greedy both sides lose.
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