Examination of Witnesses (Questions 720
- 739)
WEDNESDAY 16 MAY 2007
MR PHILIP GREGAN
Q720 Chairman:
We have been told that one of the recent growth areas is the lower
alcohol rosé wines. Is that your experience as well?
Mr Gregan: Rosés are booming around the
world and they do tend to be lower on alcohol.
Q721 Lord Greaves:
Taking you back to the imports and exports and so on and the balance
of the trade, you have nearly half your home market and about
half your product is exported, so that suggests that your imports
and exports are in some sort of balance. How does that match in
terms of volume and price?
Mr Gregan: Our exports in 1990 were about 5%
of our production. Last year I think they were 55%. In three years'
time they will be 75% and in 10 years' time it will probably be
90%. On imports, our traditional supplier of imported products
has been Australia and that is because they produce a different
wine style from ourselves, so in many ways we are not competing
head on, we are complementary. New Zealand has never exported
up until about five years ago a significant quantity of wine to
Australia. Australia is now our third largest market. We have
become the largest supplier of imported product into Australia.
It is the same reason that they are being able to sell in New
Zealand, we are not producing a product which is directly competing
with their product. Some of our grape growers do not like the
imports into New Zealand; but, if we want to sell a lot of product
off-shore, you have to accept that the quid pro quo is to allow
imports into our market place. The other part of the equation
is that, if we want to be able to sell our wines into the UK,
for example, if a UK firm wants to come and buy one of our wine
companies, then that is the same part of the trade that is taking
place. We fundamentally believe in open markets.
Q722 Lord Greaves:
Are there tariffs against imported wine?
Mr Gregan: New Zealand has a trade agreement
with Australia, so it is 0%—a zero rate of tariff. Because
many years ago we decided we loved Champagne so much, there is
a zero rate of tariff on Champagne. Products in all other markets
face a tariff of 5%.
Q723 Lord Greaves:
In terms of your exports, where do your exports go now?
Mr Gregan: The UK is our biggest market, so
about 30% of our wine comes into this market place, 25% into the
United States, 25% to Australia, 4% into Canada and the rest to
various markets. The total value of our wine exports this June
year end will be about £280 million and that will double
over the next five years.
Q724 Lord Greaves:
Presumably this increase in exports that you are forecasting is
increased production?
Mr Gregan: Yes.
Q725 Lord Greaves:
Will that go to the same places? Or will the destinations change?
Mr Gregan: Those figures I gave before added
up to roughly 85%. We think over the next five years 80 to 85%
will continue to go to the three major markets. Asia long term
represents a very significant opportunity to the international
wine industry. We have done some promotional events in Korea,
Shanghai, Tokyo and Singapore recently. I do not think it is just
about New Zealand wine but there is a very strong level of interest
about wine and I think long term they are very, very good markets,
they are just going to take time to develop.
Q726 Lord Greaves:
It will all be the same sort of wine in general that you are producing
and exporting, will it?
Mr Gregan: From our perspective Sauvignon Blanc
and then a little bit more Sauvignon Blanc and then some more.
Pinot Noir is our second most exported variety, and then I suspect
aromatic whites, such as Pinot Gris and a little bit of Cabernet
and Merlot.
Q727 Lord Greaves:
They are the products that work at the moment for you and you
think will continue to work?
Mr Gregan: Sauvignon Blanc accounts for 75%
of our exports by volume. That is wonderful but it is also a risk,
so we are working very hard to promote Pinot Noir and Pinot Gris
and other varieties as well. If the world loves your product,
you have to enjoy the ride; that is what we are trying to do.
Q728 Viscount Ullswater:
I think you said it was the oenological practices that had driven
you to get this World Wine Trading Group established in the New
World countries. Did you consider that the OIV had anything to
offer you, because it looks as if you were slightly side-stepped
there? Are you in competition with them? Where do you see the
OIV? We have taken evidence that the OIV are setting standards
for oenological practices, which most countries then will accept.
What is your take?
Mr Gregan: I have not attended an OIV meeting
for about two years but from 1992 for the succeeding 14 years
I attended OIV general assemblies.
Q729 Viscount Ullswater:
Is New Zealand a member?
Mr Gregan: New Zealand is a member of the OIV.
The New Zealand industry is a partner with New Zealand government
in that membership. We have recently upgraded our participation
into a number of the expert groups. We are sending some of our
industry experts along to those. The OIV is an organisation that
is struggling with the internationalisation of the wine industry.
It was a European body and it is struggling to come to terms with
its role, not as a European body, but as an international body.
The United States walked out of the organisation because of that
struggle. New Zealand and Australia stayed in on the basis that
we are better being on inside of the tent than on the outside
of the tent and attempting to make change. It is not a standard—setting
body and, speaking as an industry person here, the New Zealand
government would not recognise the OIV as a standard—setting
body. It provides guidance to countries. We think it has a very
important role to play but that is as long as it operates as an
international body and not as a functionary of the European Union.
It is still coming to terms with that role. It has definitely
made some progress but people who go there, the government delegates,
are by definition government people; they are the bureaucrats
who have a vested interest in maintaining the pre-eminence of
geographic indications on wine labels. They are the people who
have a vested interest in maintaining only those wine practices
that are permitted in their individual regions. As soon as you
say there might be another way of doing something, they throw
their hands up in horror and say, "This is not possible"
and they start to literally cry about the evils of irrigation
or the dangers of oak chips.
Q730 Viscount Ullswater:
Your World Wine Trading Group is more the market—orientated
body rather than a historical hangover from practices that went
on in the last hundred years?
Mr Gregan: Yes, it is. As the name says, World
Wine Trading Group, it is about facilitating trade. The OIV is
not a group about facilitating trade. It could be.
Q731 Viscount Ullswater:
But it falls short of that?
Mr Gregan: Yes. When the World Wine Trading
Group was set up, it was specifically said that it was not being
set up in opposition to the OIV because some of the member governments
would not have participated in an organisation that was set up
in opposition to the OIV, notably South Africa, Chile and Argentina.
It was not anti-OIV. It had an agenda which may have reflected
some of the OIV's limitations but it was not set up to replace
that organisation.
Q732 Viscount Ullswater:
In the evidence we read we noticed there was something called
the Focus Vineyard Group.
Mr Gregan: Yes.
Q733 Viscount Ullswater:
Can you just explain a little bit about that? Is that a government
initiative? Is it a World Wine Trading Group initiative?
Mr Gregan: It is an industry initiative. As
an organisation we fund viticultural research and oenological
research. The challenge with any research is actually, once it
is completed and you have the Holy Grail—the answer, to
get people to pick up on the research. The Focus Vineyard is about
research to practice, providing practical hands-on guidance as
to the best practice in vineyards and wineries, reflecting the
latest research that has been carried out. It has done its job
done very well, we think.
Q734 Viscount Ullswater:
Does it keep the industry looking forward?
Mr Gregan: What is the total quantum of knowledge
about wine production that is out there and how much is currently
being used? There is obviously a big gap between the two and it
is really bringing people up to speed and, as new research comes
in, it will deliver those research results in a practical way
to grape growers and wine makers.
Q735 Chairman:
I take it you have read what the Commission is saying about the
possibility of reforming the EU wine regime?
Mr Gregan: Yes.
Q736 Chairman:
What do you think of it?
Mr Gregan: I think it is a step forward. I do
not mean to preach from the other side of the world, but they
have had a series of interventions for many years which have perpetuated
over-production. World over-production of wine is about 30% and
it is virtually all here in Europe. The question is why. Part
of the market has moved away, but also Europe has continued to
produce wine for which there is no product, and things like crisis
distillation and normal distillation and bans on planting and
all those sorts of things have perpetuated the status quo. I think
payments to get people out of wine production—to say "Pull
up your wines"—that has to be a significant step forward.
There are so many interventions; there have been subsidies on
sugar; there have been subsidies on grape musts. You have to do
all of those things and that is what I think Mrs Fischer Boel
was attempting to do, to address a wide sweep of issues. Once
you have one intervention by regulators that cascades, you have
another one and then you have another one and then you have another
one. I cannot think of any more that the European Union could
have so they have to try to pare it back some way. I think it
represents a step forward but they still do not believe in the
market. They think they can define the market; the market defines
itself.
Q737 Chairman:
They like to blame the consumer, do they not?
Mr Gregan: The consumer is terrible person;
they know what they like. That whole EU wine regulation is about
production. It is not about the market. It is saying, "This
is how we are going to produce wine, these are all the controls
we are going to put in place and then you, the market, you have
to take what we give you". The market has not liked it; it
has moved away.
Q738 Viscount Brookeborough:
If the EU were modernised as you think that it should modernise,
it would not actually be very good news for you?
Mr Gregan: Somebody at the European Commission
said exactly that to me yesterday. We are slightly conflicting.
We like to see Europe tied down with both hands behind its back
being unable to compete; but, if you follow our philosophy in
a healthy wine market and self-belief, actually a healthy wine
industry in Europe is good for the wine market. Ultimately that
is what we come down to. If the reforms enliven and increase competition
in the wine market, that is good for wine. If we then can succeed
in getting a little bit of the action, we are more than happy.
Q739 Viscount Brookeborough:
What other alcoholic drinks are produced in New Zealand?
Mr Gregan: The whole gamut: gin, beer, whisky—maybe
not whisky now. The dairy industry in New Zealand produces whey
alcohol, which is very high quality alcohol, which is the basis
of vodkas and gins. You may have seen a vodka brand called 42
Below, which you may or may not have seen, which has been very
successful and has just been bought by Bacardi. That is a New
Zealand vodka brand.
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