Spirits high despite tough tariffs abroad

Drinks such as 42 Below can be seen on shelves as far away as Dubai. Photo / Grant Bradley

Overseas demand for New Zealand spirits and liqueurs continues to climb despite tough trading conditions for distillers.

Exports for the 12 months ending June rose to $45.6 million, up 4.3 per cent on the previous year. But the performance paled in comparison with the 35.3 per cent rise achieved a year earlier, when exports rose from $32.3 million to $43.7 million.

However Distilled Spirits Association chief executive Thomas Chin said it remained an impressive performance, given currency fluctuations and challenging economic conditions.

White spirits vodka and gin were the biggest export category, followed by liqueurs and ready-to-drink mixes.

By value, the $20 million Australian market is the largest for New Zealand producers, then North America and Asia, which is mainly the three markets of Korea, Japan and Taiwan.

Chin said New Zealand spirits and liqueurs enjoyed a good reputation overseas - citing 42 Below as the best known example of this - thanks to the country's clean, green image.

But trade access remains the biggest obstacle to growing export sales. Of the five major distilleries in New Zealand, three - in Tirau, Edgecumbe, and Reporoa - process whey, a byproduct from the neighbouring dairy industries, into raw alcohol.

This, known in the trade as neutral spirits, can be further processed into a different range of premium spirits and alcohol types, but is not.

Chin said the industry was forced to bulk-export the raw alcohol to markets such as Korea and Taiwan.

"If we finished those products into gin or vodka, for example, we would face very high import tariffs going into those markets.

"Whilst we do sell finished products to those markets, we could sell a lot more if some of the import barriers were lowered."

He said tariffs in those markets alone would add between 50 and 75 per cent to the product's price.

While the spirits and liqueur industry is dwarfed by the country's $764 million wine industry, Chin said there was "considerable" potential to increase exports more. The relatively new New Zealand liqueurs derived from cream and fruit are already available in about 30 countries.

"The industry is disappointed that the Doha Round of international trade negotiations has apparently collapsed. We believed that a successful round would have led to the opening of new markets and a significant increase in opportunities for the high quality [New Zealand] spirits."