Making the premium market pay
Are New Zealand winegrowers destroying their brand?
Friday, February 26 2010 || Comment || BY Mark Revington - The Independent
Spratt, North American by birth and a former senior partner in PricewaterhouseCoopers’ global mergers and acquisitions consultancy, has a PhD in psychology, which may give him an insight into group behaviour.
He reckons the desire to blend in with the crowd is cultural.
We should be emulating Icebreaker and 42 Below in building strong brands out of New Zealand, he suggests, not panicking at the first sign of a global monetary upheaval and discounting like mad.
It’s hard to argue with the overall thrust of his argument.
New Zealand makes good wine but globally we make little, so why not build a New Zealand brand that sits at the premium end of the market?
And he marshalls compelling statistics to back up his case.
Price is one of the most powerful ways to push a product, Spratt says, so why sell yourself short and undercut the market when a longterm marketing strategy would be intent on pushing the price up to reflect the true value of New Zealand wine.
“The New Zealand wine industry is not over-producing,” Spratt says. “We are undermarketing.”
But there has to be a caveat in there. Destiny Bay produces 2400 cases in a good year, admittedly at prices which resemble the true value of that wine.
What about a producer such as Palliser in Martinborough, a byword for quality, producing 50,000 cases a year at prices much lower than those charged by Destiny? What if you are a wine producer with 2008 stock still in the warehouse, debts to service and a need for cashflow?
It can be a tricky meeting pressing short-term needs that are at odds with a long-term marketing strategy.
Most New Zealand winemakers, I know, would agree it is better to build a New Zealand brand that aims high. I don’t think they are afraid of heights as Mike Spratt and Chris Canning claim, but the pressure to retain a good cashflow often leads companies into making short-sighted decisions that aren’t always good for their brand.
The New Zealand wine industry faces some interesting conundrums in setting its direction for the next decade.
The wine industry has been praised for its marketing and promotional efforts, but the implication that clever marketing has led to a high-end position globally is wrong. In many markets the premium sought by NZ winemakers for Sauvignon Blanc has always been questioned - Germany, Benelux, the USA, Japan for example. Those markets have never attached a high value to our distinctive, but simple white wine hero.
Now, with excessive supply, the price position once enjoyed in valuable markets like the UK and Australia is plummeting. We have to ask ourselves: Was scarcity the driver of price - not smart marketing or a distinctive wine style?
What has always been lacking is a genuine shared vision and intelligent brand development for "Wine NZ". This has never been a priority as the primary focus was on planting and selling.
It's time to re-think what NZ wine - the brand - has to offer the world. Premium priced Sauvignon Blanc may well be a lost cause, but we have Pinot Noir to consider: both as an exceptional opportunity and as a looming supply issue. The promotional efforts of the past need to be discarded and a strong, relevant and compelling brand position developed.
Posted by Dave Nicholas - Winepartners at 16:28 on March 1, 2010
At last count there were 643 members of the New Zealand Wine Institute. Ninety percent of the members (577 in total) are small producers making less than 200,000 litres each per year. There are six large producers (less than 1% of the members) making more than 4 million litres each per year. These six members control 40% of the Board seats and along with representatives of the sixty medium producers, control 70% of the Board seats. The economic and strategic objectives of the small producers are not the same as the medium and large producers. The question has been raised whether it is reasonable to expect a single industry group to fairly represent all three categories of producers. Any efforts by the NZ Wine Institute to reposition the country's wine brand must first address the diverging interests of its members.
Posted by Mike Spratt at 09:40 on March 5, 2010
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