Wine growers urged to expand cautiously

 

EASY DOES IT: A new report urges winegrowers to avoid over-supplying the market and forcing prices down.

New Zealand wine growers need to be very careful that production does not outstrip demand, according to a new report by Rabobank.

Favourable weather conditions pushed grape production for New Zealand wine to a new record of 285,000 tonnes in the 2008 growing season -  up 39 per cent from the previous record in 2007.

This is the third consecutive year of increased tonnages and is expected to yield an estimated 205 million litres of wine, or 22.8 million cases, with finished wine quality predicted to be excellent.

But the boom in production places wine producers in this country in something of a quandary.

"Relatively small volumes, a distinctive product and a long-term premium pricing strategy have positioned New Zealand's wine exporters ahead of competitors in a global wine market typified by oversupply and downward pressure on prices," the report.

Of the 147 million litres of wine produced in New Zealand in 2007, 76 million litres (51 per cent) was exported, the domestic market is still vitally important for the industry. New Zealand's domestic wine consumption has been increasing at a steady pace, with per capita consumption reaching 12.2 litres per annum in 2007.

The report advises producers to take a "measured" approach to expansion, and maintain focus on high quality rather than high volume.

"Setting conservative growth targets may result in sacrificing some profits in the short term, but will position New Zealand's wine producers and growers for a more sustainable, profitable future," the report says.

Wine consumption will likely be relatively resilient during the downturn, according to the report, because consumers will often compensate for eating at home by drinking a better wine than they normally would.