Christopher Adams

The Business Herald’s markets and banking reporter.

Reduced harvest good for wineries

Photo / Thinkstock
Photo / Thinkstock

As national grape harvests fall, an industry analyst says wineries have an opportunity to wrest back market share from supermarket-owned private label brands, which have benefited from an oversupply of wine.

At 269,000 tonnes, New Zealand's grape harvest was affected by the poor summer and was 18 per cent down on the record 2011 vintage of 328,000 tonnes.

A Rabobank report this week says the smaller harvest had reduced the high stock levels that fuelled a surge in bulk wine exports - product shipped overseas in giant plastic bladders - and the expansion of private label brands, sold at lower prices than other products.

Marc Soccio, a senior analyst with the bank, said a large amount of Marlborough sauvignon blanc was now sold through private label brands owned by supermarkets and foreign wine companies.

"Now ... the stage is set for a battle over future supply with more limited stocks available from the 2012 harvest," Soccio said. "It is expected that a significant number of brands without strong supply lines will face supply constraints and rising costs over the coming year."

He said the best-managed private label brands had integrated themselves into the supply chain and would be able to manage industry cycles and reinforce their position in the market.

"However, other more opportunistic [private label] brands will be less able to compete with manufacturer brands in the future as cost pressures rise and price disparities begin to narrow."

Soccio said manufacturer-owned brands had an opportunity to "shake out some of the newer, more opportunistic players that have emerged over recent years, but the extent to which conventional brands can wrest back control of the supermarket still remains to be seen".

NZ Winegrowers chairman Stuart Smith said the major grocery retailers had "ruthlessly exploited" the oversupply that had plagued the industry over the past few years and the tightening of supply would help to reduce the dominance of the private label brands, which had a detrimental impact on many wineries.

"[The supermarkets] are struggling, now, to get supply at a price they're used to paying," Smith said.

"What we will see is the lower price-point wines ... will probably disappear."

However, Foodstuffs NZ communications director Antoinette Shallue said the company - which operates New World, Pak'n Save and Four Square stores - enjoyed a strong relationship with its private label suppliers, which would enable it to "keep pace with the market".

She said the penetration of private label wine was relatively small compared with other grocery lines.

"Consumers still want a range of wine options right through from the value offering to the more boutique or expensive wines."

- NZ Herald

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