Marlborough viticulture market stands out with strong sale numbers in 2020
The volume of vineyard sales in Marlborough has increased over the past year, after two years of lower than average activity. The number of transactions is often a good indication of market sentiment and indicates strong demand across the lifestyle and productive vineyard market at present.
Our analysis shows that values appear to have increased throughout the second half of 2020, despite uncertainty surrounding the impacts of Covid-19.
Source Colliers Rural Valuation
Vineyard profit before tax per hectare for the 2020 vintage has shown a lift in returns on the basis of favourable growing conditions throughout Marlborough, with high quality fruit produced at favourable yields. Vineyard operating costs have continued their upward trajectory with a rise of around 2% on last year, mainly as a result of increased labour cost.
Returns will fluctuate from season to season depending on growing conditions experienced and the market takes a long-term view on profitability within the industry.
We have graphed the vineyard profitability as reported in the Vineyard Benchmarking Report produced by NZ Wine and MPI, along with the model vineyard value, which shows a relatively consistent relationship on a 5 year rolling average basis.
Source Colliers Rural Valuation
Smaller wineries have been impacted by the decline of hospitality and cellar door trade in New Zealand and this is expected to continue with tourist numbers unlikely to recover in the short term.
However, despite Covid-19 difficulties, New Zealand wine exports have actually benefited from the pandemic, with more people drinking at home across the United States, the
United Kingdom and Europe, leading to an uptick in retail sales, along with increased online sales.
A report published late last year by Rabobank found Sauvignon Blanc exports were up 131 percent year-on-year to August 2020. Aided by the large vintage harvested in early 2020, wine export revenue is forecast to increase 9.5 percent to $2.1 billion for the year ended June 2021.
Indications suggest production from the upcoming 2021 harvest will be lower due to frosts in several South Island regions in September and October. This is putting upward pressure on grape prices with competition between wineries to secure fruit to meet high demand.
With increased labour costs and a high exchange rate this may squeeze winery margins, and will further highlight the importance of scale and markets in the industry.
