Kiwi's flight weighs on wine

MARLBOROUGH EXPRESSGLUT GONE: Despite last year's surplus, sauvignon blanc exports are so strong there could be a shortage by Christmas.

The wine industry is no longer in surplus thanks to growing exports, but the turnaround is being kneecapped by currency swings, New Zealand Winegrowers says.

The pan-industry group will hold its annual gathering in Auckland this week, where the theme is profitability.

Focus has swung in one short year from keeping volumes down to the prospect of a shortage of white wine.

At harvest this year, grape growers were urged to try to keep grapes down to last year's levels, a target they failed to achieve. Even so the industry greatly increased wine sales, soaking up the glut that started in 2008.

Winegrowers say the massive U-turn has been achieved through major marketing efforts overseas and lower-priced "bulk" wine sales.

But chairman Stuart Smith said that while the sales were being made, winegrowers were "being foot-tripped along the way" by the high New Zealand dollar.

Chief executive Phillip Gregan said as of June, the industry had sold the equivalent of 310,000 tonnes of grapes, well outstripping the 2010 vintage of 266,000 tonnes.

This year's harvest was 328,000 tonnes but there were no surplus concerns. He wanted delegates to know they were making good progress. "Fundamentally the world still wants our wine."

Smith said there was only one issue on every winegrowers' lips this week and that was the exchange rate.

"It's been up, it's been down, but it's been over its long-term fair value for a considerable length of time and that's mainly due to Government policy," Smith said. Wine exporters traded largely in US dollars, even in Asia.

Smith believed the Government should intervene but was under pressure from banks to retain the high dollar because it helped keep their foreign debt costs down.

"The best place to start would be to encourage the banks to source more of their money from within New Zealand."

Meanwhile, he said, exports of sauvignon blanc were tracking a month ahead and by Christmas supplies could be running short.

"That's a fairly strong statement but if you look at the numbers ... exports are going extremely well. The major question is, what are we selling it for? You can't raise your prices overnight just because the dollar's changed."

New Zealand Winegrowers also supported calls from China-based trade experts to band together to mount a generic promotion of New Zealand wine in Asia.

"I think what they see is a lot of individual companies, which is a fair comment," said Gregan. "But the fact we have 700 wineries doesn't mean the industry doesn't work together. It does.

"The wine market does crave diversity, that's one of the things it likes, but there is opportunity both for competition and co-operation."

Asked whether the wine industry needed a campaign like the tourism industry's "100% Pure" theme, Gregan said it already used a "Pure Discovery" slogan in some markets.

"We're certainly working with NZTE [New Zealand Trade & Enterprise] and MED [Economic Development Ministry] on the right approach for New Zealand wine in the China market over the next few years."

In the meantime, winegrowers are working with Rugby World Cup organisers to increase exposure. Wine tastings were being held throughout the country and a dinner in Auckland hosted by Sir Richard Branson would feature 20 local wines selected by judges.