Call for collaboration in wine industry(2)
The fallout affected the industry by:
• Pricing pressure, significantly reducing net margins.
• Increased inventory levels, combining with pricing pressure to considerably reduce cash flow. The result was increased debt levels, weakened balance sheets, suppressed asset values, and restricted ability to exit.
• Aggregate grape-grower debt increased from $1.07 billion in 2008 to $1.40 billion in 2011.
• Wineries' aggregate debt also increased from $0.89 billion to $0.97 billion over the same period.
• Consequently, funding pressures rose at a time of elevated uncertainty in many markets.
• There was an increase in the supply of relatively "homeless" wine to shift excess production. That pushed down margins throughout the supply chain for bulk wine and created competitive pressure on packaged/branded products.
• The dilution of New Zealand's brand and quality characteristics from packaged/branded wine to bulk and house brands. This occurred in some of New Zealand's key export markets and mostly in the high-volume retail channel.
The national vineyard acreage grew sharply until 2008 but levelled off considerably when prices began to fall.
Limited appetite for expansion and very little new area coming into production meant the size of vintages over the next three or more years would be driven primarily by yields.
The forecast lower yields for the 2012 vintage, courtesy of a more average growing season in Marlborough for sauvignon blanc, would help with the short-term picture.
However, questions remained about whether that would be enough to compensate grape growers for lower volumes, the report said.
Wine industry remedies
• Grow demand, through targeting expansion in existing markets and opening up new markets
• Continue focus on "super premium" positioning for New World wines
• Strengthen relationships and rebuild trust within the industry
• Collaborate to manage supply and inventory
• Focus on productivity and collaboration to drive efficiencies throughout the supply chain
• Continue research and marketing to maintain a high-quality public image of New Zealand wine
