Bargain Pinot Noir?

Birth of a Wine Blogger has been in hibernation for a while, a bit like our dormant vines. 

Recently I was woken from my slumber by a colleague in the industry sending me a link to a Facebook post he had published. He was making the point that a certain Pinot Noir (see link) is on promotion in supermarkets for just $10 a bottle. He went on to say that it must be made from wine at the lower end of the spectrum, sourced from the countries featured on the label, to retail at that price.  He asked, in a world of commoditised, characterless wines, is this something we really need?

Check out: http://tinyurl.com/nesvbh2

What concerns me about this, as a dedicated Pinot producer, is that Kiwi consumers will buy this wine thinking it is a bargain, try it, may not have a great experience, think all Pinot Noir is the same, and be turned off the variety forever. 

Why did he conclude that the wine must come from the "lower end of the spectrum"? 

Let's dissect the $10 and see where he is coming from. Of the ten dollars, the government collects $3.66 (the ALAC levy of about 3 cents, plus $2.13 excise duty and $1.50 GST); pretty good return for the government! 

Then, assuming the retailer takes a 30% margin ($3) and the distributor a 20% margin ($2), that leaves $1.34 for the winemaking! Let's be conservative though and say the winery sells direct to the retailer, so no fee for the distributor. In that case the remaining sum is $3.34. Let's see where we end up if we consider that.

What's left to cover the wine component after allowing for bottling costs, freight and distribution, warehousing, marketing and other related expenses? Say these add up to $1.80 per bottle. That leaves $1.54 for the wine. Say my analysis is too tough. Add another $1 back to cover that. That leaves me to ponder the quality of wine you might buy at $2.54 per bottle? 

Contrast that with the cost per litre of our 2015 Pinot Noir. That was over $13 per litre, before bottling, taxes, etc. So even if my costs are high, we can safely assume it is not top quality, hand-picked Martinborough Pinot Noir in the wine we are discussing. 

Disclaimer: I have not yet tasted this wine. I will as soon as I can get a bottle though, then I'll report back. If I have wronged a good product I will admit that. However, my comments above are based on experience and general principles. I can say with confidence is that I have learned in my 30 years in the wine industry is that it would be an absolutely amazing achievement to deliver a 'Premium Pinot Noir' (which is what the label claims) for $10, let alone $2.54. 

Project Update

Well, vintage 2012 is over. A smaller harvest than anticipated, but nice quality fruit to work with. We are pleased to have made some very good wines, and having the nice new winery to work in really made it all go very smoothly. It was a little stressful leading up to vintage, with the builders still working on site just a few days before picking commenced! But in the end it all worked out fine.

The new fermenters shown in the accompanying images worked perfectly and the new sorting table will have helped us take a big step up in quality. The new space has also helped give us the ability to try things we have only dreamed of in the past; for example barrel fermenting some of the varieties.

All in all you can look forward to some very interesting wines from our 2012 efforts.

But, even writing about these exciting developments, brings me back to one of my pet hates - Excise Duty. We have just been advised there will be a further increase in Excise Tax on 1st July.

With what we have just spent in capital improvements, new tanks and new barrels, on top of a small harvest, we really should be thinking about price increase to compensate, however in the current wine market that is just not possible. And the increase in Excise Duty will further erode margins.

Remember this is one of those hidden taxes all governments love. Like Excise Duty on fuel it just keeps money flowing into government revenue in a manner not visible to the general public. And it is linked to the consumer price index, so it increases nicely each year too, another plus for the tax collector. The Excise on wine is now over $2 per bottle and the winery must pay this each time they make a sale. Do the math; if you buy a $10 bottle of wine, over 20% is Excise, add that to the 15% G.S.T. and government is doing very nicely thank you!

So my question is such a tax needed on wine? The answer is no.

Why? Several reasons:
1. It does not make sense to penalise a successful and growing export industry by increasing the cost of doing business in the NZ home market. Almost every successful business starts from a solid platform at home and then pushes out to exports. All that such a tax does is advantage cheap imported wines; be they bulk wines from Australia, or wines from countries with lower production costs or subsidies (like Argentina and Chile), thus impacting the viability of New Zealand wineries.
2. It is a tax burden that unfairly selects just one industry and adds enormously to their operating costs, while other industry sectors avoid it. Plus, the cost of tracking and reporting the excise duty is another burden in an already over-regulated industry
3. It is an indirect tax that could have been phased out and replaced at the introduction of GST, as many other indirect taxes were (e.g. sales taxes). As a consequence it now means consumers end up paying double taxes on all alcoholic beverages, regardless of type, which is clearly unfair

4. Apologists for excise taxes say they are only levied on supposed harmful products (e.g. fuel, tobacco, alcohol, etc) but in fact it is certainly not clear to me that all the excise collected by government is returned the community via initiatives related to the taxed product.
5. On top of that, excise is also a crude tool that does not differentiate between the wide range of alcoholic beverages on the market. It is certainly not the drink of choice for the binge generation; look at alcopops and spirits if you want to address that concern.  I accept a new approach is needed to manage alcohol abuse, but why penalise the vast majority of wine-lovers who enjoy and respect wine, by treating them like the problem society really needs to be focused on?

What has been done about the excise tax problem? Well the New Zealand Winegrowers organisation (a body that represents all NZ vineyards), has tried worked hard for change to the excise regime for many years, but to no avail. I know it must be hard negotiating with government officials who fail to see the big picture, but we must persevere.

That's because the consequence of excise continuing to increase each year, will result in more small vineyards in New Zealand failing. To me, continuing a tax that disadvantages Kiwi wineries in so many ways is foolish. It is not being overly pessimistic to point out that unless something changes small family-owned boutique NZ wineries with slim margins are not going to survive. That will not only be to their cost, but also will lead to diminished consumer choice and reduced employment opportunities.

Last Sunday, 20th of November celebrated 20 years of Toast Martinborough.

It was a beautiful day with over 11,500 people sharing good food, wine and music with the region's wineries.

A wonderful day was had by all at our Toast Martinborough site this year. The crowd was huge and well behaved, the music great, and the food from Guten Apetit Catering was fantastic. 

Sadly at other locations a small minority spoiled the day for some, through over-indulgence. That we had none of that on our site shows just how well organised it was. A lot of the credit for the organisation of a very professionally run site must go to Nicola, a valued member of the Murdoch James team. And what better way to show our appreciation than with flowers!!!

We had several acts on stage, including the Thomas Oliver Band and Ladi6, and estimate over 50% of the total crowd joined us for at least part of the day. Like all festivals we had the crowd come in waves and at times the challenge was being able to serve them all in a timely manner. We were very quiet in the morning, when the crowd followed tradition, by starting at TK, then very busy mid-afternoon, then quiet again late afternoon as the festival goes moved on to other wineries to close out the day. At the busy times, Nicola's systems played their part.

It is hard to spell out in words what a terrific day Toast Martinborough is; the pictures tell a better story. Even better still, come next year, and see for yourself. But you have to be quick - tickets can sell out in less than half an hour after release!!

And for those folk who gave us feedback on what we could do better next year, rest assured we have taken the comments aboard.

They tell me it will look good when finished!

New Grand Entrance (to be) 

Many of you have asked for more information on what we are doing with building extensions and landscaping.

There are quite a few things under way. The tasting room is being extended to cater for the increasing number of visitor who join us for tastings or the incredibly popular 'Grape to Glass'tour. As part of that building project we are also constructing a new grand entrance, so that the first impressions when folk drive up to the winery is both welcoming and attractive. There is also a big deck (almost finished) being built outside the tasting room so tasters can relax and taste in a pleasant location. We will equip the deck with comfortable tables and chairs so tasters can sit and order a platter to enjoys as they do their tasting. With a weather forecast of a long, hot summer to come, I am sure the deck will get plenty of use.

New Steps Up Cliff

Then there is a big project of landscaping down the cliff in front of the restaurant. We are building rock retaining walls, steps, planting new shrubs, building a bridge - the list goes on. The stairs down the cliff are going to look simply stunning: huge cut macrocarpa timbers, in-filled with exposed aggregate, and lit at night. The bridge across the creek will make the lower vineyard area an even more attractive location for weddings and events.

At present the site looks like a construction zone, and as wedding season is almost upon us I am as nervous as our brides that it all be finished on time. I am assured by our builders and landscapers that it will be, but no rain please weather gods!