Struggling to recover its composure following a large 2008 harvest, the New Zealand wine industry must now cope with another bumper crop of grapes. New Zealand Winegrowers has announced the 2011 harvest produced 328,000 tonnes of grapes, a 23% increase on 2010, which will again increase price pressures on winemakers already struggling to sell sufficient quantities and return profits.
While New Zealand Winegrowers chief executive Philip Gregan claims the vintage is a positive for the wine industry, the growth of bulk wine exports to meet stock pressures continues to undermine profitability within the industry.
“New Zealand wine sales have been very strong in the past year, equivalent to 310,000 tonnes of grapes, and a larger harvest was needed in 2011 to rebuild inventory and support current and future sales. With lower stocks in winery cellars, this has prompted a grape intake this year of 328,000 tonnes of grapes, slightly up on our pre-harvest expectation of around 310,000 tonnes,” Gregan said.
“With the vintage now over, we believe the wineries and growers can look to the year ahead with cautious optimism, which will be another step forward in the recovery of the sector,” he added, before acknowledging the profitability problem that the increased harvest poses.
“Profitability levels remain an ongoing concern and recovery of winery and grower incomes should be a focus for all industry participants in the year ahead,” he concludes.
Wine producer Bill Spence of Moncellier wines says the claims of increased sales satisfying pressure from yet another oversized vintage are misleading.
“The industry doesn’t know where it is right now,” he told foodnews. “We are holding our own, but at what cost? Selling bulk wine below cost to Australian supermarkets is not the solution we need.”
“This is a great vintage for the consumer,” says David Batten, a specialist consultant in the wine distribution area. “The fact is that pricing is a consequence of supply, and a bigger harvest can only keep wine prices low for the foreseeable future.
“So many people blame supermarkets for eroding winery profits, but they only react to a problematic supply issue,” he adds, noting that supermarkets in both Australia and New Zealand are reacting in the same way. Supply of Marlborough Sauvignon Blanc, Australia’s most popular wine style, is now dominated by bulk shipments from New Zealand to fill low price demand for supermarkets’ own brands.
With Marlborough producing 34% more grapes in 2011, increasing its share of New Zealand’s wine production to 75%, and the sauvignon blanc crop up by 50,000 tonnes (29% increase) to 224,000 tonnes, that situation will not be changed by this year’s vintage.
“It has got to the stage where sales volumes are directly related to price points,” says Batten. “The wine trade right now is all about volume.”
And it is volume that seems to be compromising New Zealand wine’s profitability. Before the impact of the huge 2008 vintage hit the industry, bulk wine exports were less than 5 million litres, around 6% of exports. In the last three years that has grown to 45.8 million litres, 30% of total exports. Over the same period the value per litre of New Zealand’s wine exports has fallen 22% from $9 per litre to just over $7.
ref: Data from New Zealand Winegrowers Annual Reports and April 2011 Export Report.
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