Why some in one of our prestige rural industries think a water royalty is a good idea

Disclosure of interest: Paul Tudor MW is a member of Fish & Game and Forest & Bird, formerly member bodies of the Land & Water Forum and recently joined the Labour Party, however these views are his own

 

Jacinda Ardern is apparently a fan of Lindauer Brut, other than that, we do not know whether she enjoys NZ Sauvignon Blanc. And yet Labour’s proposed water levy could turn out to be a lifesaver when it comes to our wine industry.

Nobody seems to know exactly how much of our wine industry is controlled by foreign owners (one recent pundit guessed 65%), but we do know that Sauvignon Blanc dominates our exports and that the percentage of bulk exports is on the rise (around 25% according to that same pundit.) Winegrowers NZ does not publicise these statistics, whereas their counterpart across the ditch does, in fact we can learn a great deal about the global wine market from Wine Australia, including a few sour tasting lessons.

I recently visited Australia to do some wine work and one of my colleagues there asked “Have you guys hit the Sauvignon Blanc wall yet?” The question is a doozy, for fifteen or so years ago, Australia ran into a brick wall, a massive oversupply of Chardonnay that they couldn’t sell anywhere, which they are only now just getting over and customers are starting to get interested in Chardonnay again.

Swing over here and look at what is our most important wine export, Sauvignon Blanc. A few years ago the UK was our big growth market for Sauvignon, then it became Australia, briefly, and now it is the US, this to me is a worrying signal… What has happened is that markets have fallen in love with the punchy, intensity of the variety as expressed in our growing conditions, only for that fervour to fade.

Bulk wine exports will continue to be a significant part of our industry, as concern over carbon miles grows. Non tariff trade barriers are one of the icebergs floating out there that could derail the rapid growth in our wine exports (the other is the boredom factor with Sauv – lack of diversification.) Done well, bulk shipping of Sauvignon can be successful, although it inevitably does impact on aroma and bouquet, so is not really suitable for the premium market like your Churton or Dog Point. Ideally where we want to be is more at that quality end, adding value, however a succession of industry leaders do not seem to share that vision (perhaps because of the dominance of the big multinationals?) and so long as the variety grows like a weed and can be cropped heavily without too much impact on flavour, then who cares, right?

This is where irrigation comes in.

Many of the water rights for ground water irrigation of vines have already been allocated, especially in more developed regions such as Marlborough. And some companies have had to start collecting their own water on their properties.

But if you are on the flat in Marlborough and running a double canopy system and aiming to crop your Sauvignon at 12 or more tonnes per hectare, then you need plenty of leaves to get the sugar levels high enough, and you need water.

And lots of it.

Labour’s tax royalty may have an initial negative impact on some winegrowers trying to establish new vines, those first few years are crucial in a wine’s establishment, or to those who use aquifer water in overhead sprays as a frost protection measure. Presumably having consulted the industry, exceptions can be made for extreme circumstances or any serious weather events, including droughts (high quality European wine regions generally frown on irrigation – however the rules are occasionally loosened for severe drought.)

Yet there remains too much dependence on irrigation for certain wine styles, most notably heavily cropped Sauvignon Blanc. This is a problem for our future profitability and sustainability as an industry.

Low yields do not automatically mean higher quality wine, but it is a starting point for better quality. And market perceptions of our wine seem to be different between markets, but surely that better and higher value wines are the way to go (improving our “productivity” and sustainability by putting more money back into our wineries.) Eventually the end consumers are going to wise up to diluted flavours and high acid wines propped up with residual sugar and other winery tricks.

Meantime, we are slowly steaming towards that brick wall of a Sauvignon Blanc oversupply…

If we look at the vintages from 2010 to 2017 (and these are national averages, not Marlborough alone), the average yield for a Sauvignon Blanc vineyard in this country has been 12.15 t/ha. And that includes the outlier vintage of 2012, when it was 8.94 t/ha. 13 tonnes appears regularly (2017, which was badly affected by rain, came in at 12.95 t/ha.)

In Sancerre, where great unoaked Sauvignon Blanc originated, the law states that the maximum you can crop is 8 t/ha, though in exceptional years, and they do have to be amazingly good in terms of weather conditions, you can apply and get that extended above 9 t/ha.

We should probably be aiming for our Sauv Blanc vineyards to be cropping in that sub 10 t/ha level if we want to make premium, higher priced Sauvs, all things being equal, with good training systems, canopy management, balanced vines.

Now our government and Winegrowers NZ have been clear that they will not legislate to reduce yields, but a water royalty on those growers who do use irrigation water can be a practical first step to encourage lower yields, better canopy management and potentially higher quality harvests and finished wine. Sustainable Winegrowing NZ (SWNZ) does not place limits on the amount of irrigation water that can be used, it just merely notes this as an area for attention, but the water “tax” will have an immediate impact on those who chose to hang heavier croploads.

This is clearly what Sam Weaver, and other, enlightened winegrowers were saying after recent controversy over Labour’s proposals:

https://www.stuff.co.nz/business/farming/agribusiness/96076158/wine-marlborough-criticised-for-political-stance-on-labours-water-policy

To round out this opinion piece, a brief look at the lessons learned by the Champagne industry.

In the late 1980s, Champagne fell on hard times.

The 1987 sharemarket crash had not helped with the demand side, but there were also supply issues. A number of houses had expanded quickly, and there were also new players entering the market, co-operatives in some cases, in others old, defunct houses were resurrected, often having no vineyard land and very little stock in the cellar. Initially there was a lot of horse trading in stock, it was legal then to purchase half made Champagne in bottle and finish it off with your own label, cork and cage. But then these new entrants were hit by the sharp drop in demand brought about by the financial markets downturn.

So prices started heading down.

With their margins suffering and some companies nearly going to the wall having to pay for all these bulk purchases, industry leaders took the bold step of sitting down and thrashing out some new rules.

The first major change was to cut production for any subsequent vintages. They did this by eliminating the Deuzieme taille (“second cut”) at the press, so only tete de cuvee and Premier taille (“first cut”) could be used in a wine labelled Champagne.

The second step was to increase the minimum ageing period before a bottle could go on the market. This had the immediate effect of aiding the wines already in the cellar, a few extra months does wonders for high acid, high cropped bubbles. It also shut off the tap into the market, so prices started to turn around again.

The major Champagne stakeholders carried out these changes at the start of the 90s and the industry has never really looked back. It was to be some years before the sale of unfinished wine (“sur lattes”) was to be outlawed, but the key changes that happened during the industry consultation were to lower yields and temporarily at least, restrict supply for what was a better and more attractive product as a result.

 

[Postscript – there is also a lot of water used in wineries – and arguably dealing with that winery wastewater may be more of an issue than vineyard runoff, which is why some companies have developed wetlands near their wineries and other innovative solutions to that problem.]

[Post postscript – if we are talking non tariff trade barriers, given the hoopla around carbon miles and New Zealand wine a few years ago, the fact that we promote ourselves as clean and green is also a major USP – if we don’t clean up our rivers then that is going to really destroy overseas consumers’ confidence in our wines.]

 

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