Wine prices might be cut

Wineries exporting to Britain may have to cut prices due to the weakening pound sending the kiwi dollar to its strongest levels in 30 years.

Britain is New Zealand's second-biggest wine export market by value and biggest-equal with Australia by volume, with about $285 million exported there last year.

The kiwi's long-term average against the pound is 39 pence, but on March 10 it hit 47.46p. It is the strongest cross rate since June 1979, when the kiwi was worth 50.54p, although analysts say there is no straight comparison because of the pre-float regime at that time.

New Zealand Winegrowers chief Philip Gregan said the strong cross rate had wiped "tens of millions of dollars" off the industry's books. Compounding the problem was a global wine glut and Britain's lacklustre recovery from the recession.

"Some people are looking at diverting product out of that market ... If they can, people are trying to generate price rises, but it's very, very difficult in the current economic environment."

Not many producers had gone out of business but some were putting their vineyards "to sleep" for a year, Mr Gregan said.

Hunter's Wines managing director Jane Hunter said the weak pound and economic conditions in Britain might eventually force her to cut her prices there. Britain is her company's biggest overseas market, taking about 30 per cent of its exports.

She said the combination of a strengthening kiwi, an influx of cheap sauvignon blanc and cost-conscious customers in Britain was putting New Zealand wineries under price pressure.

She was partly protected by having contracts in both currencies, she said. "Sometimes, bigger customers will want deal in pounds because then they know they've got a constant price, and we like sometimes to deal in New Zealand dollars so we know we've got a consistent price ... and it probably evens itself out. But there'll be a price review eventually if the exchange rate keeps maintaining such a high level."

Saint Clair Family Estate owner Neal Ibbotson said about 30 per cent of the winery's total production was exported to Britain.

"The combination of the strength of the New Zealand dollar and weakness of the pound just makes New Zealand wine more expensive in the United Kingdom and, as they become more expensive, then sales tend to fall off."

Mr Ibbotson said if the pound continued at its current level, Saint Clair would have to consider dropping its prices. "But of course, we accept that the currency is part of the world that we live in and we will get fluctuations."

Ad Feedback Lawson's Dry Hills general manager Sion Barnsley said the winery's British distributor would no longer accept reduced margins, so the winery was looking at what it could do – which included reducing its own margins to near cost.