“Demand has dropped off, and there’s a lot of stock still sitting in markets. We’ve had some very high vintages, meaning we’ve compounded the problem … We’ve got a real supply and demand imbalance,” says Limmer.
“We’re seeing prices come under real pressure around the world, and consumer habits are changing. We’re seeing a new generation of non-wine drinkers and they’ve got a huge choice.”
The upshot is the New Zealand industry needs to proactively reduce supply to get back to balance, Limmer says.
“The likely outcome in the year just gone and in the year ahead is that there’ll be a potential surplus that’s it’s just not sensible to be harvesting.”
While all wine-producing countries are affected, New Zealand has a “significant” advantage with its main production of white wines, particularly sauvignon blanc, at a time consumers are seeking lighter-style wines and slightly lower alcohol, Limmer says.
“We have an advantage, which we’ll be really pushing in the market. But it’s likely to be another couple of years before we start to see the economic supply-demand balance fall back into equilibrium.”
Indevin, whose brands include Villa Maria, Vidal, and Esk Valley, is doing its bit to regain that balance by last harvest capping its growers’ long-term average volume.
Indevin’s own vineyards took an even bigger volume haircut, Limmer says.
With the US being New Zealand’s biggest wine market, the new US 15% tariff couldn’t come at a worse time.
“The biggest challenge we’re all facing is just the uncertainty. Things change on a regular basis. It’s very hard to plan. There are consequences, which will flow quite broadly in many unintended ways in regards to geopolitical shifts Everything kind of moves when a decision or a suggested decision is made,” Limmer says.
“Ultimately, consumers are the ones who will bear the cost of it in the US market. We’re having to work with our customers to work out what’s the most sensible way of sharing the burden. In some cases, we’re having to pick up some of the cost.”
Limmer thinks it’s “almost inevitable” there will be some consolidation in the New Zealand industry.
The good news is Canada and Ireland are proving solid, though small, markets.
“There’s really strong growth coming out of China and South Korea, though they’re starting with very low volumes. I feel a concerted effort into those new markets will see new wine-drinking consumers really attracted to New Zealand wines with their lighter styles.
“I think we should be optimistic.”
