Magazines Archives - 2008 December

New Zealand wine producers told to limit production
Story 13 - Food Business Area

NEW ZEALAND wine producers have been advised to limit their wine productions, amid optimism that the industry would be posting record harvest this year.

In a new Global Focus report, titled New Zealand wine supply – testing new limits, released in October by agribusiness bank Rabobank New Zealand, local wine producers were told to limit grape and wine production, in order to maintain profitability in the industry by ensuring that supply of wine does not
exceed demand.

Earlier, the country’s trade association, New Zealand Winegrowers, revealed a record grape harvest in the country for its 2008-09 period. The board anticipated a 39% growth over its production in the previous year to 285,000 tons, as a result of favourable climate conditions.

“Having demand exceed supply is the strongest position a wine producer can hope to enjoy,” said Rabobank senior analyst Adam Morris. “Rushing to change this imbalance and match supply
with demand will ultimately place downward pressure on prices.”

In addition, wine exports from the country increased to a record NZ$766 million (US$582 million) in the last manufacturing year, with the Ministry of Agriculture and Forestry, along with the trade board, revealing that exports in the near future may exceed NZ$1 billion.

“Strong global demand for New Zealand wine has allowed the nation’s producers to maintain or increase prices in major export markets at the time when competing countries have been forced
to discount in the face of fierce international competition,” Morris continued.

He added that the “sustained success of New Zealand wines in export markets” to “relatively small volumes, a distinctive product and a long-term premium pricing strategy” is said to have “positioned New Zealand’s wine exporters ahead of competitors in a global wine market typified by oversupply and downward pressure on prices”.

“As established markets remain firm and lucrative new markets beckon, it is easy to be swept away by the wave of optimism washing over the industry … 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,” Morris maintained.

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