Bumper year for wine industry

Vidal Estate's Hugh Crichton says the oversupply issues are mostly behind the industry. Picture / NZME.

Average profitability before tax rises across all the different category sizes in survey

The New Zealand wine industry had another record harvest in 2014 but learned from past experiences of oversupply and avoided keeping large volumes on hand, says an annual survey.

New Zealand Wine Growers and Deloitte, in the jointly prepared Vintage 2014 report, said the turnaround in the industry appeared "increasingly sustainable" and that the optimism of recent years was continuing.

The findings in the report were based on responses from 28 winemakers who took part in a survey sent to New Zealand Wine Growers' members.

Average profitability before tax was up across all the different category sizes of winemakers in the survey, a sight unseen since 2007.

While this was a promising sign, a Deloitte spokesman said some of the respondents in the survey were not the same as last year's, which could be a reason for this result.

The average before-tax profit across the size categories ranged from 3.3 per cent to 17.6 per cent, when taken as a proportion of total revenue. This ratio generally became more favourable as revenue increased, reinforcing the trend that profitability is linked to size.

"The survey results underpin a renewed optimism in the wine industry after a period of supply imbalances, high external debt levels, the global financial crisis and impacts of bulk wine sales," said Deloitte partner Peter Felstead.

The report said that total turnover of the entire New Zealand wine industry was $2 billion a year. About $1.33 billion of this was from exports. Close to 445,000 tonnes of grapes, a record harvest, were produced in the year - up 29 per cent from 345,000 in 2013.

"Fortunately, the industry seems to have learned from its past experiences with oversupply and has been able to deal with this increase by being able to realise revenue out of the excess and avoiding having large volumes remain on hand," Felstead said.

Winemaker Hugh Crichton, of Hawkes Bay's Vidal Estate, said the oversupply issues that surfaced in 2008 were mostly behind the industry. "The important lesson from that was that we managed supply and demand carefully. But also, importantly, a lot of producers went out to the world given there was pressure to sell stock ... and went to new markets, in particular to people who hadn't been exposed to NZ wines."

Vintage 2014 report
• 2014 industry turnover $2 billion.
• $1.33 billion of this came from export earnings.
• 445,000 tonnes of grapes harvested in 2014.
• Up 29 per cent from 2013.