What can the New Zealand wine industry do to protect its "premium" brand image internationally? Rob Hamlin has a suggestion.
New Zealand wine, it has oft been said recently, occupies a premium position in the international marketplace.
To a certain degree this position is forced upon our producers due to the relatively high cost structure of this country's industry.
Some of these costs, such as the relatively small scale of production compared with competitors such as Australia, and the relatively high levels of wages in this country, compared with competitors such as Chile, are unavoidable.
Others, however, are not, and chief among these is the ludicrously high cost of agricultural land in this country relative to its capacity to produce income and relative to the prices paid by our keenest competitors for this basic agricultural input.
This is an issue that is not restricted to the wine industry, but it does seem to be particularly badly affected by it.
One estate agent of my acquaintance informed me before the recession that mentioning the "g","v" or "w" words doubled land values in any area.
This is no longer the case, but its legacy of high debt remains with the industry today.
Another legacy of the "grape gold rush" was the establishment of vineyards in areas that were unlikely to produce good grapes, and the fashion-driven planting of grape varieties that are both difficult to handle and, in many cases, not well suited to the locations in which they were planted.
Many of these were planted and then placed in the hands of new owners who did not have the necessary experience to cope with their problems.
We have all seen the cheesy McMansions surrounded by a dismal patch of struggling grapes that were built and sold as an established winery with guaranteed sales of the crop.
The grape gold rush has created two enduring problems for the industry.
A whopping financial hangover, and an issue with uneven quality.
The first requires a good brand and related premium prices to resolve it.
The second represents a direct threat to the establishment and maintenance of any such brand.
Some years ago during the "go-go" era of the wine industry, I took an experienced overseas wine taster around the country.
One major comment was the absence of any strong relationship between the price that was asked for a wine, and the quality of what eventually emerged from the bottle.
Pricing appeared to be "cost plus", rather than quality driven. These sentiments have been echoed by my contacts in the UK markets, who have for many years commented that New Zealand wine's "premium" image is not backed up by a level of quality in the bottle that is consistently superior to its competitors - or consistent at all for that matter with regard to some of our smaller producers.
Nothing will kill a brand faster than uneven quality, especially if that brand has a premium positioning.
The French wine industry has failed to resolve this very issue with regard to their Appellation d'Origine Controllée (AOC) premium wines, and it has cost them dearly as a result.
All wine from a designated AOC area within France can qualify for the AOC "appellation" mark if it is made in the area and made in the "right" way.
There is also a taste test, but this test is administered with a lack of consistency and disinterest that makes it largely ineffective.
As a result, the AOC has become virtually worthless as a reliable consumer guide to quality and consequently holds a similar value as a consumer brand.
To put it bluntly, not all New Zealand wine is of premium quality, and the rest of the world is beginning to realise this.
It will therefore be impossible to maintain a "national premium" for the wine industry, unless the export of wines that do not conform to this positioning is forbidden.
It seems unlikely that such legislation to enforce this will be forthcoming from the Government.
It is not part of their ideology and it may well also fall foul of GATT commitments. This means that any national or regional appellation initiative based on origin is unlikely to deliver a sustainable premium position in export markets over the long term, regardless of the investment that some may put into them.
The only option available to the wine industry in this situation is to develop its own supra-brand that will replace the now defunct national premium image.
Any such brand would have the following features:A trademarkable and recognisable brand mark that could be easily applied to a closed bottle.
A system to ensure that only wine that was assessed after bottling to be of an absolute quality for each export market was allowed to carry that mark. (The expectation would be that a sizeable portion of this nation's production would fail to qualify for the brand.) Would it work? Research at Otago indicated that a gold medal, which is a similar but potentially less potent quality-indicating supra-brand mark, increased price expectation by about $2.30 a bottle.
So it's worth a try. However, all you wine producers out there, what do you think?
Robert Hamlin is a senior lecturer in marketing at the University of Otago
