New Zealand is the most export-focused of all the world’s major wine producers. Photo / 123RF
New Zealand is the most export-focused of all the world’s major wine producers. Photo / 123RF
A rising level of cheap, low-quality imported wine is worrying New Zealand winegrowers as escalating costs, including Government excise tax increases, squeeze their ability to profitably supply wine to Kiwis.
This is one of several industry concerns in a 2024 annual report of industry-good organisation NZ Wine, along with flator declining sales, tough economic conditions, falling global demand for wine and increased taxes at home and in offshore markets.
Cost increases since the start of the inflation spike in 2021 had taken a toll on industry sentiment, undermining sector confidence and profitability, the report said.
“At home, rising costs are squeezing the ability of New Zealand producers to profitably supply wine into the domestic market. The data indicates that imported wine, much of it low quality and low cost, is taking a rising share of the market.
“This trend is of concern to all New Zealand winegrowers.”
Total wine sales in New Zealand were down an estimated 8% at 78.9 million litres, compared to 85.7 million litres the previous year.
“On a per capita basis, the decline is even steeper with wine consumption down over 20% in less than a decade.”
While confident about the medium to long-term future of the $2 billion export wine sector, NZ Wine said the developments in New Zealand and wine markets around the world “increased uncertainty about the short-term direction of our sector”.
After record export increases in 2023, export volumes fell 24% from July 2023 to January 2024, with value down 22%.
But from February 2024 exports rebounded, lifting 6% from their January lows.
Overall for the June year-end, exports totalled $2.1b, the second-highest annual level for the industry but 11% down on the 2023 record.
The immediate cause of the early-year decline in export shipments was reduced replenishment orders from importers, distributors and retailers, who maintained their sales by drawing down on inventories.
New Zealand exported 276.2 million litres of wine with a value of $2.1b in 2024, compared to 315 million litres with a value of $2.4b the previous year.
Total wine production in 2024 was 284.4 million litres, against 360.7 million litres in 2023.
“Adding to the uncertain environment, tough economic conditions and in some markets, increased taxes, led to reduced demand for wine,” the report said.
In New Zealand, the wine market continued to decline.
NZ Wine expects some "stellar" wines to come to market after a high-quality, but small, 2024 vintage. Photo / Talia Macdonald
This was due to a range of influences, from demographic change to increased regulation such as restrictions on the sale of wine due to interpretations about the law, and increased excise tax.
Most “galling” of the cost increases were those imposed by the New Zealand Government, the report said.
“Domestically, consecutive excise hikes two years in a row have taken the excise rate to $3.69 per litre, up more than 11%.
“Excise on wine sold in New Zealand now amounts to over $290 million per year. Further to this, wineries now face a 47% increase in the alcohol health levy (formerly the Alac levy).”
There were some bright spots in the year.
Selling prices for New Zealand wines rose, with the average price in 2023-2024 achieving the highest of all countries competing in this country’s major markets.
While export volumes and value fell, in key markets the US and UK, sales of New Zealand wine grew during the year, despite flat or declining markets for wine overall, the report said.
“This speaks positively to the reputation and standing of our wines with consumers, and the innovation that has been such an important driver for the industry’s international success.”
New Zealand is the most export-focused of all the world’s major wine producers, with nearly 90% of total wine sales made offshore.
The new free trade agreement with the European Union was a positive during the year, significantly improving access to the wealthy European market.
Consumers would see some “stellar” wines come to the market after a small but high-quality 2024 vintage.
“Undoubtedly, the wines from 2024 will add to our reputation as a premium quality producer,” the report said.
“However, volume produced from the harvest (395,000 tonnes) was well down on the past two years, reflecting cool spring and early summer weather.”
Future supply would be boosted by a steady rise in vineyard area which reached a new peak of 42,519 hectares in 2024, up more than 7000ha over the past decade.
NZ Wine’s biosecurity register projected continuing growth in vineyard area of around 500ha a year, down slightly on the past decade, the report said.
“Taking into account the smaller 2024 vintage, we expect that wineries will draw down on any inventory they may have carried over from previous vintages to support both international and domestic sales during the next 12 months and as such we are not anticipating any supply constraints in the year ahead.”
The report noted again that climate change had the potential to change the distinctive characteristics and flavours of New Zealand wines, which had underpinned their marketplace success.
Research had been initiated through NZ Wine’s wholly-owned subsidiary Bragato Research Institute to develop new plants to meet the climate change challenge.
The first major presentations on this research were showcased to members during the year.
The New Zealand wine industry employs more than 7000 people.
Andrea Fox joined theHerald as a senior business journalist in 2018 and specialises in writing about the $26 billion dairy industry, agribusiness, exporting and the logistics sector and supply chains.
