Kiwis face up to challenges
Thursday 26 August
It’s good to see the New Zealand wine industry facing up to the challenges it faces rather than bury its head in the sand or, worse still, deny things aren’t smelling of roses.
So, at today’s Romeo Bragato conference in Marlborough, Stuart Smith, chair of New Zealand Winegrowers, made a balanced and wise speech.
Falling profitability, oversupply, and the strength of the NZ dollar have been the crux of the problems the industry now faces, leading to Kiwi wine companies struggling or going out of business. Winegrowers also called for another harvest of 265,000 tonnes after two record harvests of 285,000 tonnes in 2008 and 2009.
Having spent seven months in New Zealand I don’t profess to be an expert but there are things I have noticed on my way round the country’s wine regions that have surprised me. I believe there’s naivety among the smaller players of the trade. No doubt, that occurs in many other wine producing countries. Consulting for an independent wine merchant in the UK for the past seven months and looking for new wines for its portfolio, there’s a lack of awareness of what’s going on outside New Zealand. Poor branding (or lack of it), dated labels, and an unwillingness to negotiate on ex-cellar prices makes you wonder if they’ve ever been to the UK, US or Australia to look at what’s on the shelves and the competition they’re up against. Obviously, many New Zealand producers are on the ball but many smaller wineries are making wine for themselves.
Here’s some snapshots from Smith’s address, offering another insider’s insight into the industry:-
After two decades of sustained growth, we are all now experiencing the worst trading conditions since the mid-1980’s. The global recession and markets trading down combined with issues specific to our own sector have seen grape and land prices fall sharply, bulk exports lift, in-market wine prices down, the NZ dollar is high against the UK pound and the US$ … times are tough, very tough indeed.
He later added: “Falling profitability is the major issue for growers and wineries right now. It is the issue that must be addressed – but it in turn is a function of a number of different issues. Supply and demand, the value of the NZ$, tax rates, compliance costs - these are all issues affecting profitability, so we need to have a range of strategies to address these issues as far as we can.
“...So going forward we must continue to be market led, harvesting no more grapes, making no more wine than the market can profitably absorb.
In that vein, we have been asked frequently in recent weeks ‘What is the demand for New Zealand wine out of the 2011 vintage?. Our assessment at this stage based on information from our wineries and looking at market trends is that a vintage of 265,000 tonnes which is the same size as 2010, would be sufficient to meet demand for NZ branded wine in the next year.”