The New Zealand wine industry has been going through a tough period since the biggest harvest on record in 2008. Oversupply plus an economic crisis signals problems for any industry.
Bulk wine started flowing out of New Zealand, prices fell, buyers own brands popped up at a fiver, brand equity took a beating.
Last week, New Zealand Winegrowers’ CEO Philip Gregan was in parliament to report on the wine industry’s performance. Rather him than me…
“We see ourselves at a fairly decisive point,” said Gregan at a press conference following his report.
“Volume is up 25% and value up 5% last year and that’s the lowest volume growth we have had in the last 15 years.”
Growers has been working with the industry to encourage lower yields, fewer canes per vine eg two or three instead of four, and Gregan is confident that progress is being made with bulk prices up 40% on last year. However, he admitted they’re “not out of the woods yet”.
Looking ahead, it’s hoped that the oversupply situation will be over by 2012. And they’re predicting 30% growth over the next five years to 2016. China will be the number one market for Kiwi red wines in the not too distant future – it’s already their fourth biggest market at the moment. But everyone else wants to be in China too and it’s a bunfight. Every wine producer in the world is seeing China as a silver bullet at the moment but if you look at the figures – 90% of wines consumed in China are Chinese and most people can’t afford to buy imported wines because of high taxes.
And if you’re in the UK, expect to see higher prices and lower volumes of wine. I’ve written a piece in this week’s Harpers Wine & Spirit about Kiwi companies expecting sales to fall as they raise prices to cope with the strength of the New Zealand dollar and falling profitability. If the dollar remains strong against the pound and the US dollar in the next 2-3 years, as predicted by economists, that’s another sticky wicket for them.
In the period to 2016, expect there to be more pain to come, Kiwi wineries going under and more consolidation. The Rugby World Cup may offer some temporary respite, but it’s not going to be a golden ticket.
