28 Nov 2012

NZ wine industry facing supply shortage

6:45 pm on 28 November 2012

New Zealand's $1.2 billion wine export industry is facing a shortage of supply because of climatic conditions and lower investment in vineyards.

Deloitte and industry representatives New Zealand Wine Growers have released their seventh annual financial benchmarking report into the sector's exports.

It found that the industry continues to show profitability, with wineries that earn between $10 million and $20 million in revenue showing the most profit, partly due to having the lowest overheads and interest costs.

Profit of wineries which have revenue of more than $20 million declined, partly reflecting increased bulk sales.

The report says seasonal conditions reduced the 2012 harvest and an increase in grape prices is being reported.

Wine Growers chief executive Philip Gregan says a supply imbalance in the industry from 2008 onwards was exacerbated by the global financial crisis, which led to some downward pressure on prices and reduced profitability.

Mr Gregan says since 2008-2009 sales have continued to grow quite strongly and with the smaller vintage in 2012 there is a shortage of wine out of New Zealand this year.

Given that there's been very little vineyard planting over the last three or four years and continuing strong growth in demand, it's likely New Zealand wine will be in short supply in the medium term.

Mr Gregan says that's driving interest in possible new vineyard developments and some reinvestment in the industry.

He says most export growth for New Zealand wine is in North America and Asia, in particular China.

Mr Gregan says the global brand has not been hurt by a previous grape glut which led to a decline in the value of sauvignon blanc grapes and many growers pulling out vines of that variety.