Owen Hembry

Owen Hembry is the business news editor of the New Zealand Herald

Weather holds key to vintage year for wine

Philip Gregan. Photo / Richard Robinson
Philip Gregan. Photo / Richard Robinson

Anticipation is building in the wine industry with the harvest just around the corner for the billion dollar export sector.

But nothing is being taking for granted.

New Zealand Winegrowers' chief executive Philip Gregan said a huge amount of hard work could hinge on the weather during the last couple of weeks.

"There's high excitement but nobody gets too excited until they get the grapes in the tank, because everything can go wrong up to that point."

The harvest gets under way in earnest next month and Gregan is hoping for a classic Indian summer, for the sector which had wine exports worth $1.1 billion for the year ended June last year.

"And most years that's what we get," he said. "We can handle normal amounts of rainfall but some nice warm dry days and cool nights are the recipe."

Last year saw the industry harvest a record 328,000 tonnes of grapes - significantly more than the 285,000 tonnes in 2008 that resulted in about a 27 million litres oversupply that helped erode wine, grape and land prices.

A pre-vintage survey for this year is under way and the harvest could be smaller than last year, with cool weather in many areas during flowering resulting in lighter yields.

"I think most people would say in the industry the medium term signs are looking very encouraging [but] we're still dealing with short-term issues," Gregan said.

"We are selling all the wine that we produce, we're not continuing to build stock, which is very good news, the question is about price realisation."

A report by PricewaterhouseCoopers said the exchange rate difference between 2007 and 2011 was costing the industry about $80 million year - equivalent to about $250 per tonne of grapes, Gregan said. The average grape price last year was about $1200 a tonne.

"So it's a significant impact."

There were a lot of positives for the industry, including exports of pinot noir exceeding one million cases for the first time.

"We're seeing really sold growth into markets such as China," Gregan said.

Delegat's Group managing director Jim Delegat said the industry faced a considerable challenge with about 30 per cent of all exports now in bulk wine at low prices.

"There's a great misunderstanding in the industry because people are saying the surplus has been dealt to but it has been dealt to via the bulk wine market ... [which] is a very low price market which hasn't helped the branded wine producers achieve good prices nor help growers improve their income."

It was a long way out before the industry returned to the profitability that it needed to sustain investment and grow global markets, Delegat said.

Deloitte partner Paul Munro did not think New Zealand's premium position had been tarnished.

"Yes we had significantly increased volumes a few years ago and an oversupply, a record harvest last year but in a global scale ... we're still a very, very small producer and that's actually quite important in terms of protecting that premium positioning the industry spent a long time to establish."

A survey last year by Deloitte found wineries across the spectrum had improved profitability in the past financial year compared with results in 2010, with those at the smaller and larger ends of the earning spectrum improving by the greatest amount.

The survey, which was released in December, found indebtedness combined with reduced land values continued to plague the industry, and despite efforts to reduce costs many wineries were still struggling to become profitable.

Munro said receiverships were fairly isolated and there were signs the industry was heading in the right direction in terms of profitability.

"But to be what I'd consider to be sustainable in the longer term I think we probably do need to look at different models, whether it's ownership consolidation, or collaboration or some other form of finding ways to work together and breaking down some of the fragmentation within the industry."

Meanwhile, prices for consumers here looked good for the short-term, although for longer term sustainability it probably did not work to sell prem-ium wine at such levels, Munro said. "[There's] time to stock some away."

- NZ Herald

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