Marlborough 2021 Vintage Impact Summary April 2021
As the vintage in Marlborough winds down I became curious about the impact of this grape harvest. Throughout the 2021 vintage my friends and colleagues all had a view on the reasons behind the early timing and lower yields. This fueled the curiosity to understand more about how this vintage will impact the various wine businesses within the industry. The purpose of this report is to take a macro approach to understanding the 2021 vintage in Marlborough then create insight into the downstream impact on the global sales volumes of NZ wine.
Summary and Key Insights 1.
The global sales volume of NZ wine was 337 million litres in 2020 (June Year End). This is an increase of 52% over a ten-year period.
2.
Between 2017 – 2020 export markets accounted for over 80% of global sales volume (NZ wine) and contributed to all the growth.
3.
Export growth has been primarily driven from the distinctive taste of Sauvignon Blanc which contributes 86% of total export volumes. However, in the last year there has been growth of Pinot Gris, Sparkling and Rose, thereby broadening the NZ wine styles available to global consumers.
4.
After the record 2020 Marlborough vintage of 343,036 tonnes the 2021 vintage is forecast to be lower. This is due to a dry January and February, combined with frosts and inclement weather that adversely impacted flowering.
5.
There are three forecast scenarios of the 2021 harvest from Marlborough. They predict a range between 258k to 272k tonnes which is 21-25% below 2020 or 1520% below the 3- year average.
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The year after a lower vintage (compared to the previous) results in a decline or levelling of global sales volume, illustrated by the impact of vintage 2012 and 2015 on demand. The opposite impact occurred with vintage 2013, 2014 and 2016.
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The 2021 forecast tonnes of 258k (scenario A) from Marlborough will impact future global sales volume. This is forecast to be at 309 ML by June 2022; a 15% decline on the previous year which will impact supply available for export markets.
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The challenge will be to optimise the limited 2021 supply. Beginning with partnering customers and distributors to ensure wine is available on shelf for the next 12-15 months. Marlborough 2021 Vintage Impact Summary 2021 | www.jpew.co.nz
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Supply trends and 2021 yield projections The Marlborough region experienced a record vintage in 2020 resulting in a total 343,036 tonnes harvested from 27,808 producing vineyard hectares. This vintage delivered 12.3 tonnes per producing hectare which is the highest yield since 2016. As per the chart below the vintages between 2016 – 2020 provided regular yields between a range of 302k to 343k tonnes with a very consistent period between 2017 – 2019. The only declines of significance to the previous years vintage (Supply Var to Prev) occurred in 2012 and 2015. Both years resulted in tonnes per producing hectare below 10. This raises the question of what will be the yield from the 2021 Marlborough vintage? Vintage 2021 Forecast Scenarios
Source: Vintage 2012 – 2020 statistics from New Zealand Winegrowers Inc Annual Report 2020
This chart provides three 2021 scenarios (A, B, C) to forecast the tonnes harvested in 2021. Key points to understand are: • All three scenarios use the same producing vineyard hectares assumption of 28,642 ha, 3% above 2020. This is consistent with vineyard expansion rates from the previous two vintages. • Each scenario considers the weighting of the key grape varieties within Marlborough (predominately Sauvignon Blanc) and impact on yields by variety e.g. the Pinot Noir yield is forecast to be 50% lower than 2020. Key Insights 1. The 2021 vintage scenarios all forecast a low harvest due to a dry January and February, combined with frosts and inclement weather that adversely impacted flowering. 2. Scenario 2021 A forecasts a harvest of 258k tonnes which is 25% (85k t) below 2020 or 20% below the 3-year average. It assumes a Sauvignon Blanc yield of 9.8 tonnes per hectare. 3. The value of this decline in volume ranges between $138m (Scenario C) to $166m (Scenario A) if valued at the Marlborough 2020 Regional Average of $1,952 per tonne. Marlborough 2021 Vintage Impact Summary 2021 | www.jpew.co.nz
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Global demand trends and 2021-2022 forecasts The global sales volumes of NZ Wine has increased to 337 million litres (ML) in 2020 (June Year End) which is an increase of 52% over a ten-year period. This exceptional result has been driven (refer chart blow) by export markets with the UK, USA, AU, Canada and Germany leading this growth. The NZ (Domestic) market is in slight decline ranging from between 49 to 56ML in the last 5 years. The domestic market is ranked #4 market of NZ wine sold globally behind the UK, USA, and Australia who are all above 70ML p.a. Export growth has been primarily driven from a larger number of consumers across the globe experiencing the distinctive taste of Sauvignon Blanc which contributes 86% of total export volumes.
The 2021 forecast (2021 F) The current value (MAT Feb 2021) of wine exports is $1.98b from a volume of 304.4ML, growing at 4% and 9% respectively.
Export sales are on track to achieve the forecasted $2.1b in value or 313ML by June 2021. This equates to a volume growth rate of 9% p.a in 2021 which is above the 6% achieved in 2019 and 2020. Source: New Zealand Winegrowers reports: NZ Domestic Market Report Feb 2021 & NZ Wine Export Feb 2021
The 2022 forecast (2022 F) This forecast is a calculation we have made assuming a domestic market remaining at 49ML p.a and unconstrained export demand of 338ML or 8% growth p.a. The Gap is the missed export sales due to the lower supply available from the Marlborough 2021 vintage. This results in a supply constrained export forecast of 260ML in 2022, a 17% decline to the 2021 F. It assumes the majority of the 2021 Sauvignon Blanc will be sold between July 2021 – June 2022. Key Insights 1. Global sales volume of NZ wine has experienced exceptional growth led by export markets primarily purchasing Sauvignon Blanc. 2. Export lead growth of NZ wine will be constrained in 2021 & 2022 due to the lower supply available from the Marlborough 2021 vintage. The estimated value of this 78ML supply constraint (the Gap) is $NZ 524 million.
Marlborough 2021 Vintage Impact Summary 2021 | www.jpew.co.nz
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Understanding the export market landscape The current value (MAT Feb 2021) of wine exports is $1.98b from a volume of 304.4ML, growing at 4% and 9% respectively. Key Insights 1. Exporting Sauvignon Blanc to the world continues to drive the NZ wine export growth. It contributes 86% of the total volume exported, growing at 8% p.a. 2. The current MAT trend reflects growth with Pinot Gris, Sparkling and Rose. All broadening the NZ wine styles available to global consumers. 3. The three leading markets consistently account for 80% of the total export volume. Each of these markets have unique growth patterns. 4. The July – Nov 2020 period experienced a surge in growth from UK customers. This has corrected itself in the latest quarter. 5. USA continues a consistent pattern of growth, particularly in the last quarter. 6. Australia is ranked the #3 export market. Contributing to 50+% of the MAT volume growth. This is due to growth in bulk wine shipments being bottled in AU then distributed globally. 7. The seasonality of monthly export volumes illustrates a distinct pattern. Aug – Oct is critical for the key selling Dec Qtr. It is also aligned to the release dates of white wine vintages.
Source: all the data above was sourced from New Zealand Winegrowers NZ Wine Export reports
Feb – Mar shipments are key months that improve tank capacity pre vintage and fulfill stocks for the northern hemisphere summer.
Marlborough 2021 Vintage Impact Summary 2021 | www.jpew.co.nz
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Aligning global demand trends with vintage variability in Marlborough The purpose of this section is to illustrate the correlation between the vintage variability in Marlborough and the global demand trend for all NZ wines. The aim is to build an understanding of how the 2021 vintage will impact future sales.
Supply – Total tonnes harvested in Marlborough (Vintage Year) Supply Var to Prev – Variance of the total tonnes harvested in Marlborough compared to the previous vintage Demand – NZ wine sold in the domestic market and all export markets. (June Year End) Source: Vintage 2012 – 2020 statistics from New Zealand Winegrowers Inc Annual Report 2020. New Zealand Winegrowers reports: NZ Domestic Market Reports & NZ Wine Export Reports.
Key Insights 1. In this 2021 forecast (2021 F) we predict a total harvest of 258k tonnes in Marlborough, resulting in a decline of 85k tonnes compared to the previous vintage. 2. Global demand of NZ Wine will peak at an MAT of 362 million litres (ML) by June 2021. This is a combination of domestic sales at 49 ML and export volumes of 313 ML ($2.1b in value at $6.71 per litre) 3. The year after a lower vintage (compared to the previous) results in a decline or levelling of global sales volume; refer to the red circles above which illustrate the impact vintage 2012 and 2015 had on the demand trend. The opposite occurred with vintage 2013, 2014, 2016, and 2020. 4. The period between 2018 -2020 resulted in steady demand growth which could be viewed as constrained due to supply. Demand growth has accelerated in the past 12 months partly due to supply (record harvest in 2020) and the growth of retail sales in leading export markets. 5. The 2021 tonne forecast of 258k will impact future global sales, leading to the challenge of optimising revenue from the limited supply. We forecast global sales of NZ wine to be 309 ML by June 2022. This is a 15% decline on the previous year and will impact supply available for export markets. Marlborough 2021 Vintage Impact Summary 2021 | www.jpew.co.nz
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