This season's grape shortage is the worst in at least 10 years, according to the chairman of French group Pernod Ricard.
Pernod Ricard believes New Zealand's vintage would be nine million 9-litre cases down on last year - a staggering number of unmet demand, Bryan Fry, chairman and chief executive of Pernod Ricard Winemakers, told the Herald.
The group's own Sauvignon Blanc vintage is 34 per cent below last year's and no matter how well it managed its margins it would take a significant financial hit, Fry admitted.
The shortage of grapes this season is the result of a combination of November frosts and inclement weather during flowering season in December, compounded by near-drought conditions in the three months leading up to harvest.
"Would I say [the quality of the vintage] is better than last year? Yes, but not by a huge amount, the big difference is what actually came off the vines. That's the core crux of the problem that faces us and the whole New Zealand wine industry," Fry said today.
"The biggest issue is New Zealand wine, particularly Marlborough Sauvignon Blanc, is growing very strongly in a lot of markets around the world. The popularity is very strong so the trick is being able to manage that level of supply decrease with customers around the world, and to ensure they don't try to switch to other brands and markets."
Pernod is one of New Zealand's biggest wine producers and exports its wine to 80 markets. Like Villa Maria, Fry said it would be reviewing its prices for the season.
Villa Maria told the Herald it anticipated it would have to increase its wine prices by up to 20 per cent. Pernod is currently working through what price hike increase is likely.
More than 60 per cent of total wine production in New Zealand is Sauvignon Blanc.
Fry said the company would have to ration the number of cases it supplies to its markets this year to ensure it does not lose any listings. The group would also reduce its promotional activity this season.
"You've got to be careful because if you start favouring everything to one market, if we have a good vintage next year you don't want to go back and rebuild your total business. We're looking at how do we maintain our footprint given the volume we have and maintain the footprint of our listings and business around the world."
Pernod was currently having "tense conversations" with its suppliers over stock levels.
On top of the vintage shortage, the cost of production and harvest this year was also more expensive, which would also impact the company's earnings, Fry said.
"We had to spend a lot more money on frost control this year and also labour costs were very extreme this year because of the borders being closed. It was quite an expensive vintage for less."
Global shipping costs being the highest level since the Global Financial Crisis added another layer of expense to operations this year, he said.
Fry could not provide any forecasts on the financial impact the company would foot, but said it would need to "work as best as it can to try to protect" its margins.
It would prioritise allocation of its wine to its higher-value markets first.
"We have vineyards and wineries in Australia, New Zealand, the US, Spain, China, and no doubt this will be my number one impact this year," he said.
"It's one year. When you're in wine, it's an agricultural commodity so you're always at the vagaries of vintages, so we're looking at saying 'OK, we don't quite know what is coming next year, let's just manage through this year with the allocation that we have.
"The first thing we're doing is we're not going to be able to promote as much, and less discounting in key periods, but the most important thing is to maintain the bottles on the shelf overseas because if you lose a listing it is super hard to get back on the shelves."
Fry said the vintage was "the worst" Pernod had seen "easily in the last 10 years, if not longer."
Winemakers in France and parts of Europe are facing similar shortages of grapes this year due to severe spring frosts.
Pernod Ricard produces Brancott Estate, Jacob's Creek, Stoneleigh and Montana wines and is also the manufacturer of G.H.Mumm, Absolut Vodka and Malibu, among other brands.