Taking Stock – 1 October 2026

Central Otago needs more than wine

For years, wine has been one of regional New Zealand’s great success stories. It has created jobs, attracted tourists, turned previously low-value land into productive businesses and helped build an international reputation for places such as Marlborough, Hawke’s Bay and Central Otago.

But there are now enough warning signs to suggest that wine cannot carry these regions on its own forever. Growers are ripping out vines, some vineyards are being sold at distressed prices and wineries are closing or consolidating. 

In Hawke’s Bay, Sileni is closing its winery after almost 30 years. In Gisborne, weaker demand for grapes has left some growers facing large losses, with some removing vines altogether.

One newspaper recently summed up the mood rather well with the headline: “Blood on the floor fears as the grape goldrush withers”.

The downturn is also starting to show up in land values. Farmers Weekly recently reported that some Hawke’s Bay vineyards are selling well below their rateable values and at prices closer to pastoral land. One 31-hectare vineyard near Maraekākaho, with a rateable value of $2.8 million, sold at auction for just $800,000. 

Other vineyard properties are expected to move to different uses, including land where the new owner reportedly intends to remove the vines and return it to pasture. So the weakness in grape prices is now feeding through into the value of the land itself. 

Once that happens, growers face a much harder decision about what to do next. Water availability, soil type and processing capacity can all limit the alternatives, and changing from one crop to another can require a large amount of capital and several years before the new crop starts producing a return.

New Zealand wine is obviously not finished. Good producers with strong brands should continue to do well. Delegat Group, one of New Zealand’s largest listed wine companies and the owner of Oyster Bay, produced an excellent result in 2026. Revenue rose to $364 million, global case sales increased and operating profit improved strongly.

But there were also some interesting numbers underneath that result. 

Delegat deliberately reduced its 2026 harvest by 19% as part of its inventory management strategy. More tellingly, the market value of its grapes fell below their cost of production, resulting in a $9 million write-down. It also wrote down the value of its Barossa Valley wine assets by $8.7 million.

Foley Wines has been equally open about the pressures facing the sector. 

It has described wider trading conditions as very challenging, with global oversupply putting pressure on pricing and margins. Its own 2026 harvest was 7% smaller than the previous year.

Delegat and Foley are still performing reasonably well, but both are having to manage around weaker demand and too much wine in the market. This is not just a poor season or a short-term problem as wine consumption has been falling for years, and the industry is having to adjust production, pricing and inventories to reflect that.

Younger consumers are drinking differently, health concerns are influencing behaviour and lower-alcohol and alcohol-free products are becoming more common. Even in New Zealand, per capita wine consumption has fallen significantly over the past decade.

This becomes a regional economic issue when towns and communities depend heavily on vineyards, wineries and tourism. Central Otago has benefited enormously from wine, which has created jobs, brought investment into the region and supported work in transport, irrigation, earthworks, trades and professional services.

At the same time, the industry also depends heavily on temporary seasonal labour, including backpackers and workers brought to New Zealand through the RSE scheme. Those workers are important and many vineyards could not operate without them, but seasonal employment does not provide the same economic base as a larger pool of permanent, highly skilled and well-paid jobs.

This is particularly relevant in Otago, where the labour market has already weakened and the regional economy remains relatively concentrated in sectors such as agriculture, construction and tourism. 

Central Otago is not yet experiencing the same level of retrenchment as parts of Gisborne and Hawke’s Bay, which is exactly why now is the right time to have this discussion. Diversification is much easier while existing industries are still functioning well than after businesses begin closing, land values fall and people start leaving.

Mining should be part of that discussion.

That will not be popular with everybody in the wine industry, particularly those who have opposed the proposed Bendigo-Ophir gold mine. There are legitimate environmental issues that need to be considered. Mining changes the shape of landscapes and requires water and infrastructure.

What I find harder to accept is the suggestion that viticulture somehow sits outside that same debate. Vineyards use herbicides, fungicides, insecticides and other agrichemicals. Spray drift can affect neighbouring land, waterways, animals and vegetation. Research has also identified the accumulation of metals such as copper in some vineyard soils, while treated vineyard posts can leach copper, chromium and arsenic into the surrounding soil.

There is still a lot we do not know about the effects of repeated chemical exposure on both humans, native reptiles and other wildlife. It would be wrong to suggest vineyards are simply killing native lizards, but research has identified behavioural effects from some herbicide formulations and there are still gaps in our understanding of the longer-term impact.

I am not suggesting this is a reason to close vineyards as I like my wine, but the point is simply that vineyards, like mines, farms, roads and most other productive uses of land, have environmental consequences that need to be managed.

Wine also produces alcohol, which carries wider social and health costs. Alcohol contributes to hundreds of deaths each year, thousands of hospital admissions and a significant number of injuries. It is involved in drink-driving crashes and regularly features in incidents of family harm so costs the health system vast amounts of money. Not to mention the social harm cost.

Those costs cannot reasonably be blamed on wine alone, or on individual growers and winemakers, but they do make it difficult to argue that one industry should be regarded as inherently acceptable while another should be judged only by its negative effects. Every major industry brings benefits and costs, and both need to be considered.

For Central Otago, one of the biggest questions is employment.

The economic case for the Bendigo-Ophir mine has been subjected to independent scrutiny, however, it is estimated that the mine would directly employ around 350 people a year on average over its operating life, with average salaries of about $140,000. It also estimated a substantial contribution to tax and royalty revenue and billions of dollars of economic activity over the life of the mine.

For a regional economy, those are meaningful numbers. The jobs would also be different from many of those already available in the area, with engineers, geologists, machine operators, environmental scientists, tradespeople, laboratory staff and other specialist workers becoming part of the local economy.

Central Otago does not need to become less dependent on wine as it has been enormously important to the region and will remain so. The issue is what sits alongside it.

A region with wine, horticulture, agriculture, tourism, construction, technology and appropriately regulated resource development has more options when one part of the economy struggles. It also has a better chance of providing different types of employment for younger people who might otherwise leave in search of better-paid work.

The warning from Hawke’s Bay is worth paying attention to. A vineyard with a rateable value of $2.8 million selling for $800,000 would have been difficult to imagine when the wine industry was expanding rapidly, yet that is what can happen when an industry changes faster than the land and communities built around it can adapt.

Central Otago is not in that position today. The question is whether it uses that advantage to broaden its economy before it ever gets there.

Mining will not be the answer everywhere, and it should not proceed where environmental effects cannot be properly managed. But where a project can meet appropriate environmental standards, create hundreds of permanent and highly paid jobs and generate substantial economic activity, it deserves to be considered as part of the region’s future.

Central Otago does not need less wine. It needs more than wine.

New Investment Opportunities

Lodestone Energy 

Lodestone Energy has confirmed that the IPO price is $2.25 per share.

Lodestone owns a portfolio of five solar farms across New Zealand, with plans to build another 10 solar farms using the funds raised from this IPO, essentially tripling the size of the business over the next 5-years.

The company is seeking to raise between $75 million and $100 million, with no existing shareholders selling shares as part of the IPO. The new capital will be used to support Lodestone’s continued expansion across New Zealand.

For advised clients, we have prepared a research piece on Lodestone Energy, which is available in the private area of our website. If you would prefer a copy to be emailed to you, please contact us and we would be happy to send it through.

Investors can find the investment statement on our website and if you would like an allocation for these shares, please contact our office with an amount and your CSN and we will send through a contract note .

Contact Energy is expected to issue a new subordinated capital bond in October. We expect the bond to have a term of around 6 years, with a possible interest rate of around 6.00% per annum. 

Investors who are interested in this potential bond are welcome to contact us with their CSN and an indication of the amount they may wish to invest. We will then contact them once the final terms and further details are available.

Travel

Our advisors have an extensive travel schedule coming up over the next quarter, including the following dates:

5 October – Nelson – Chris Lee

6 October – Napier (Mission Estate) – Edward Lee

6 October – Blenheim – Chris Lee

21 October – Auckland (Albany) – Edward Lee

22 October – Auckland (Ellerslie) – Edward Lee29 October – Christchurch – Johnny Lee