High Kiwi threatens wine sector recovery

Ups and downs of the New Zealand dollar are threatening the wine industry’s tentative recovery, New Zealand Winegrowers is warning.

And with no going back to the ‘golden days’ enjoyed before the 2008 supply shock and GFC, the industry body is commissioning a strategic review to help plot adjustment for the sector, which earns more than $1 billion in exports a year.

The caution comes with release of the industry group's annual report, revealing the volume of New Zealand wine sold rose 11% to 221 litres in the year to June.

Export sales rose 5% to $1.1 billion, placing wine as the country’s ninth-ranked export product.

But the historically high New Zealand dollar was a major challenge to wine exporters and threatened to derail recovery from the 2008 supply shock and the global financial crisis, said chairman Stuart Smith.

The New Zealand dollar currently stands at 82.22USc, after a turbulent fortnight when it skidded from above 88USc to, briefly, just above 79USc.

Mr Smith said the longer-term consequences of 2008 were still being worked through, in the form of lower prices, tighter money and tougher markets.

Grape growers had endured another year of low grape prices – the average price of $1172 per tonne is the lowest for a decade.

Meanwhile, annual excise increases in the home market were eating into profits because they could not be passed onto consumers.

‘Profitability is a key concern for wineries and growers, as many still struggle with the legacy effects of the past three years,” he said.

The concern has prompted New Zealand Winegrowers, representing independent winegrowers and wineries, to commission financial consultancy firm PwC for a strategic review to help chart the path ahead.

The financial crisis had turned large segments of the market upside down. ‘New world’ wines were no longer a novelty and bulk wine exports – a concern for New Zealand in recent years – were now a major trend for the entire wine trade internationally, Mr Smith said in the report.

There was no going back to the “golden days” before 2008.

“We need to take stock of the operating environment with which we are now faced and then make informed decisions about or future direction.”