Pernod Ricard to slash contracts with Gisborne grape growers

Pernod Ricard is moving to cull its contracts with Gisborne grape growers in order to tame its oversupply.

Pernod Ricard, owner of Montana Wines and New Zealand’s largest wine company, has said that it is looking at options to limit its supply of sparkling pinot noir and chardonnay in the face of falling demand, both internationally and locally in the face of New Zealand sauvignon blanc.

“As a result of the changes we are experiencing in the marketplace both domestically and abroad, with an acceleration of consumers continuing to move away from sparkling wine and Chardonnay, varietals and wines that are intrinsic to Gisborne, we have experienced a structural change in demand,” says Pernod Ricard managing director Fabian Partigliani.

“We have gone to considerable effort to stimulate consumer demand for Chardonnay and initiatives include new product development, innovative packaging, capital investment and changes in wine style. In spite of this, domestic and international demand has continued to soften as Sauvignon Blanc growth has taken market share from Chardonnay.”

Mr Partigliani will be meeting with its Gisborne contract grape growers over the next week to discuss options, but it is understood growers that are not to be retained have been offered two choices; immediate termination with compensation or a two-year notice period.

“Whilst this is unsettling we want to be as upfront as possible to work together on what is a significant correction in the marketplace. We would like to reiterate that we value our strong relationships with growers and any decisions regarding grape supply contracts will not be taken lightly. However, we must plan to get the balance right between supply and demand predictions and forecasts and our future grape supply must reflect changing consumer trends,” he says.

President of Gisborne Winegrowers Society John Clarke believes the damage could be as much as 25% of the local tonnage, which is around 23,200 tonnes.

This year’s national harvest was 285,000 tonnes, with Gisborne as New Zealand’s third largest region accounting for around 8%.

This years harvest figures are for 5,400 tonnes of chardonnay and 1,200 tonnes of pinot noir used for sparkling wine.

Gisborne’s 2008 harvest Gisborne produced 4,280 tonnes of chardonnay valued at $4.59 million, and 1,166 tonnes of pinot noir for sparkling wine valued at $1.05 million.

Chief executive of New Zealand Winegrowers, Philip Gregan, told NBR that it is not involved with negotiations between private parties, but that it is concerned for its members.

NZ Winegrowers met yesterday with the Gisborne Winegrowers Society yesterday, but says it is not an isolated incident and other companies are canceling their contracts with growers also.

“Unfortunately this is not an isolated incident, but we are watching this harvest closely and working with our members offering them support and advice,” he says.

The domestic market for chardonnay is down in favour of sauvignon blanc, which has taken the number one spot.

Exports of chardonnay are down 12-14%, he says, but admits that the market is going through a period of correction.

Much of the product produced from last years bumper harvest has overflowed into this one, which has lead to an oversupply.

NZ Winegrowers is working with local growers to limit any further plantings, but admits there will be a few more vines coming online next year.

He then hopes there will be more or less of a freeze in industry expansion until 2011.

Winegrowers is currently looking at its long-term projections, and is currently doing its annual export survey, which will produce data by the end of July.