Bulk wine 'hurting industry'

The New Zealand wine industry's lack of teamwork is causing growing pains, despite significant growth over the past two decades, according to the latest ANZ Agri-Focus report.

New Zealand's unbranded bulk wine exports had the potential to dominate the country's supply and undermine the reputation and price of bottled wine, as seen in Australia, the report said. Without significant industry collaboration, the New Zealand wine industry faced a similar future.

Among the suggested remedies were a reduction in bulk wine sales, and directing the majority of New Zealand's product towards super-premium markets where high margins could balance the country's high production costs.

New Zealand Winegrowers (NZW) chairman and Marlborough grapegrower Stuart Smith said many opportunities for collaboration were available, but many smaller wineries were happy operating independently.

Collaboration offered more scale for a better return, he said. Less supply this year due to poor flowering meant most of the industry would be financially better off. Bulk wine had been a valuable tool in previous years of surplus, but this year's low yields and tonnage meant it was "out of the equation".

Most of the country's wine production was premium, and this was where the industry needed to focus. "Growing high margin sales – that's where the profit is," Mr Smith said. "Things are changing."

Growing premium wine sales, or wine that sold for more than $15 a bottle domestically, was the priority in the next few years.

Tiki Wines owner Royce McKean said NZW was hamstrung by representing the needs of two different groups in the industry – independent grape growers and wineries.

Managing supply through distributing information was vital for moving the industry forward to avoid situations such as the oversupply experienced over the past two years. However, NZW did not have the ability or authority to implement this, he said.

"It's been a buyer's market, which is not good for a small, boutique wine producing country like New Zealand."

NZW required a split so that each group within the organisation had a separate voice and were served in their best interests, he said. "With everyone acting independently, the effect is the average price they get goes south."

New Zealand's high production costs meant it could never hope to match the production scale of major wine producing areas such as France or South Africa. The industry needed to focus on sustainability and profitability rather than growing sales, he said.

"It's exactly where the industry has been trying to get to since 2007."

NZW had been a constant and effective source of support since Bladen Wines was set up in 1989, he said. Withdrawal of financial support from banks was the biggest threat the company faced.

 EXPORT STATS FOR NZ WINE

Total exports have now hit $1 billion and total sales are $1.5 billion.

The 2010-11 sales data shows exports made up 70 per cent of sales, compared to 10 years ago when it was 32 per cent.

Australia, Britain and North America were the fastest-growing destinations over the past 10 years. They total 87 per cent of exports by volume, and 79 per cent by value.

New Zealand Winegrowers has forecast growth in export markets beyond 2012 at about 5 per cent a year, mainly driven by growth in Asian and North American markets.