Falling grape prices, oversupply and hard trading conditions have conspired to produce “the perfect storm” for grapegrowers and wineries around the country and there is little sign of it getting any easier.

Tough trading conditions and high debt levels are forcing vineyard owners to sell up and others into receivership, with 30 vineyards or wineries for sale in Marlborough alone.

Meanwhile established names are also under the gun, with Daniel Schuster Wines already in receivership and more likely to follow.

New Zealand Winegrowers chief executive Philip Gregan said Daniel Schuster was the third winery he had heard of to go into receivership or liquidation in the past three months and he would not be surprised to hear of more, reflecting the tough times facing the industry.

A surprise record harvest in 2008 flooded the market with grapes, causing prices to fall. The average price for sauvignon blanc dropped about 25 per cent, from an average of $2400 a tonne to $1700 a tonne this year, a number not seen since the late 1990s, Wine Marlborough chairman Blair Gibbs said.

Tim Crawford, a vineyard and winery sales agent at Bayleys Marlborough, said a lot of people aged in their 60s and 70s were getting out of the industry after moving to Marlborough 10 to 15 years ago, chasing the dream of owning a vineyard.

However, Mr Gibbs said there were not the same numbers of people in their 50s now looking to get into the industry.

People who might have bought a vineyard were now thinking hard about investing in a high-risk agricultural venture, especially since many of them would have had a huge amount of wealth wiped off their balance sheet following the global downturn, he said.

“The romance has ended a little bit in the industry.”

High cashflow demands made wine a difficult industry to be in.

Mr Crawford said there was a question mark over future returns, which had caused some vineyard owners to put up a `for sale' sign at the gate.

There was not an influx of vineyards coming on to the market, but they were taking longer to sell, causing the numbers to build up.

Though the number of vineyards on the market seemed a lot, it was still only 7 per cent of the total area of land planted in vines in Marlborough, he said.

Some vineyards have been on the market for a year.

At the price peak two years ago, vineyards were selling for more than $250,000 a hectare; now they were commanding about 40 per cent of that figure. The prices had reflected the falling return on capital, which had dropped to about 6 per cent, compared with 15 per cent two years ago, Mr Crawford said.

It’s not just Marlborough. There are vineyards for sale from Auckland through to Central Otago and liquor industry law specialist Mason Lockhart believes the hard times are not over yet and rays of hope are few and far between, especially for growers.

“There are a lot of mortgages knocking on doors out there at the moment and when it gets to that point you don’t have a lot of options open to you,” he said.

“If you are still waiting for your first commercial yield, then there isn’t much hope, I’m afraid. But if you have a yield and a supply contract then your prospects look better.”

Lockhart, who has worked as a senior lawyer for DB and Heineken, says that New Zealand’s grapegrowing and wine industries are different to overseas models.

“There is a proliferation of small operators here, which is out of line with trends overseas, where you tend to have larger producers controlling more of the industry. I suppose in a way what we are seeing here is a correction in the market.”

He says that the lifestylers who cashed up and bought vineyards in the hopes of enjoying an idyllic retirement were now feeling reality bite and bite hard.

“A lot of people who bought into the market thought they were doing the right thing for their retirement plan. But what might have looked profitable a few years ago simply isn’t now.”

Many people who entered the industry had problems coming to terms with the harsh reality of having one annual yield and the ensuing cashflow issues.

“When I was at DB and we had Corbans, the challenge we faced was that the financial decisions were being made by brewers who didn’t have to cope with an annual harvest and an annual lump-sum payment. Brewers have a year-round operation, which makes cashflow so much simpler and if you don’t get your head around that, then you are going to have problems.”

Many in the wine industry were surprised when Waipara's Daniel Schuster Wines went into receivership, given its longevity on the wine scene..

It is not clear at this stage what forced the company into receivership, or how much money was owed to creditors.

Daniel Schuster Wines was set up in 1986. It produces pinot noir, chardonnay and riesling.

Mr Schuster was one of the pioneers of viticulture and winemaking in the South Island and became Canterbury's first commercial wine producer, at St Helena Wine Estate.

Receiver Stephen Tubbs, of BDO Spicers, said Daniel Schuster Wines was a private company and much of the information he was privy to was confidential to the business, its financiers and the staff.

"I have also given an undertaking to the staff that they will be the first to know about any decisions we may make affecting their futures."

Mr Tubbs said he was continuing to employ all four staff who had worked at the winery, while he gathered information, assessed the financial position of the company and its prospects.

The cellar door was continuing to trade, he said.

Schuster isn’t the only “name” winery to face problems, though. Sources told Wine Technology that several other big-name wineries were also stumbling under the weight of debt and that the banks have “taken the gloves off” when it comes to recouping their loans.

Lockhart said the only real advice he could offer to struggling businesses was to dig in, trim all available fat and hold on as long as possible.

“See if you have the ability to refinance or restructure. See if there are investors out there or better finance terms available. There are people out there looking for an entry into the industry, but they are looking for a cheap entry.

“Possibly there are also some of the bigger players out there who may get in and buy properties, but if they do they will only be looking for top-quality properties. But really the number of buyers is limited and many larger companies are already maxed out at the moment, especially those based overseas who already have enough exposure here.

“There are private equity companies out there, but I can’t say they are actively looking for vineyards. However, they will open to looking at businesses that can be turned around in three to five years.”

The storm is still blowing and it’s going to be a wild ride for those who survive the next few years.

“If you’re still waiting for your first commercial yield, it might be time to reconsider the industry you are in.”