Major global wine producers buying up New Zealand farms for vineyards

Major global wine producers buying up New Zealand farms for vineyards

New Zealand’s sheep and dairy farms are being snapped up by some of the world’s biggest wine companies and turned into vineyards in order to satisfy growing demand for premium wine from the US and elsewhere.

New Zealand wines command the highest prices of any country after France amongst major exporters, according to the International Organisation of Vine and Wine, as the antipodean nation’s cool climate is more suitable to growing smaller volumes of high quality grapes.

As the world’s biggest wine consumer in 2015, the US has seen drinkers increasingly willing to pay more for higher quality products. Sales of wine priced at less than $7.99 a bottle dropped in 2016, while sales of higher priced wines increased, according to Nielsen data.

Similar trends are also apparent in the UK, with consumers shifting towards bottles priced between £6 to £7, and away from the £4 – £5 range.

New Zealand wine exports to the US have tripled in volume since 2009, overtaking Australia to rank the third highest by total value after Italy in first place and France as runner up, according to the National Association of Beverage Importers.

Despite the rapid growth experienced in recent years, winemakers think there is still plenty of room for further expansion in New Zealand. Wine giants such as Constellation Brands and Treasury Wine Estates have been muscling their way into the New Zealand wine world, snapping up thousands of acres of farmland in the process, thereby safeguarding their supply of quality fruit as part of their global strategies to produce higher quality wine.

Between 2014 and 2016 Constellation added 1,800 acres of vineyards to its portfolio, a near 50% increase. The company is also investing NZ$50m in doubling the size of its main Marlborough-based winery, enabling it to produce an annual 40 million litres.

“New Zealand is still relatively under-penetrated in the US market, even though it’s been growing at double digits,” said Simon Towns, managing director at Constellation Brands New Zealand. “We think the runway’s pretty long.”

Meanwhile, Treasury Wine, Australia’s second largest wine company by volume recently bought 1,400 acres of land in Marlborough, famed for its Sauvignon Blanc. Cloudy Bay Vineyards, owned by luxury brand company LVMH is also eyeing up 52 acres in the region.

Given the interest in the region, it is becoming harder to find suitable land for new plantings. And there is debate over how many more vineyards the region can accommodate. Large grape growers in Marlborough expected to plant nearly 6,500 hectares of new vineyards by 2020, according to a recent study by Wine Marlborough, increasing the region’s production area by nearly 25%.

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