“There’s a groundswell, a movement happening within. The innovation and quality of Aotearoa’s craft spirits industry have been advancing in leaps and bounds for the last few years. The competition is reaching all new highs, both among our own domestic products and those from the overseas craft markets that are finding space on our shelves.
Distilled Spirits Aotearoa (DSA) exists to advocate for, encourage, and smooth the pathways to success for our members, both individually and collectively. One of the key elements of this is creating a national brand for New Zealand craft spirits to use when marketing ourselves overseas. Establishing and maintaining the image of our sector in the overseas markets is complex, and while only a small percentage of our members are engaging in those markets now, the more attention we draw, the smoother those pathways will become.
New Zealand products are already synonymous with quality, so now our members want to know how to maintain and protect that level of quality. The integrity of our production processes is a huge factor in this, in part achieved by establishing standards across the sector. For example, the New Zealand whisky guidelines introduced in early 2021 mean that for any producer to call their product a New Zealand whisky, it must be aged for two years in certain types of oak and made with certain types of grain. Guidelines and criteria like these limit the ability of flavoured spirits or low-quality production methods, often armed with hefty marketing budgets, to tarnish the brand.
The DSA now has 97 distilling members, and while the scale of each of these members varies from micro to somewhat large, across the country, these businesses are maturing and have ambitions towards bigger audiences overseas. Our bigger distilleries are opening the export gates, and this is cementing our image worldwide.
Cardrona Distillery has solidified its place across Europe, Scapegrace has recently gained international media attention with its new Central Otago building site, and Pokeno Whisky Company is coming hot out of the gate with its whisky launching into the UK, France, Germany, the US, and Australia.
Meanwhile, some of the major difficulties smaller NZ distillers face when looking to export are making a connection with a market, reliable volume, and price competitiveness. Finding the right buyer is a hurdle many stumble at, so when the leaders of the industry start to take up significant space, the buyers pop their heads up. However, that also leads to the other difficulty, which is pricing and the competitive nature of scale and the ability to produce large volumes is still key.
Our distillers and spirit brands are still enjoying high domestic demand and can comfortably claim a top-shelf price. For example, it’s not unusual to see New Zealand gins selling at a higher price than a 12-year-old rum or XO Armagnac. There are no fat margins loaded behind these prices, just economies of scale - or lack of - and tax. The majority of New Zealand’s small-scale distillers are realising very small profit margins with fewer than 10,000 units per year, costs per unit are going to be high, and when even domestic shipping costs are increasing steadily, it makes it difficult to explore exporting options.
This leaves bigger distilleries that have volume on their side to negotiate that last one percent margin remaining between cost and profit on the product to get it exported, which has downstream benefits for the smaller distillers, such as credible destination marketing (think Armagnac or Champagne).
The DSA is developing a framework of good practice which will strengthen our national brand and give our burgeoning industry confidence that their product will measure up against the best in the world.
My thanks to Ben Leggett from Elemental Distillers for his candid conversation, experience and insight.”
By Richard Wilson, Distilled Spirits Aotearoa (DSA)
