Eroding profits for vineyard and winery owners show the impacts of grape oversupply and global recession are "hitting hard", says Agriculture Minister David Carter.Ministry of Agriculture and Forestry monitoring of vineyards in Marlborough and H
Eroding profits for vineyard and winery owners show the impacts of grape oversupply and global recession are "hitting hard", says Agriculture Minister David Carter.
Ministry of Agriculture and Forestry monitoring of vineyards in Marlborough and Hawke's Bay showed that the past season was the "most financially challenging" since detailed monitoring began in 2004, the minister told grapegrowers and winemakers at their annual conference in Blenheim yesterday.
"I am aware of a spike in winery receiverships in Hawke's Bay, Marlborough and Central Otago," he told the Romeo Bragato conference staged by New Zealand Winegrowers.
"There will likely continue to be rationalisation in the industry in the short term."
A Marlborough grape grower that supplied fruit to major brands, including Villa Maria and Montana, was recently revealed to owe creditors more than $24 million.
Administrators McGrath Nichols reported that Awatere Vineyard Holdings and Awatere Vineyard Estates owe $24.71m, mainly to Westpac, after going into receivership in June.
And other victims of oversupply and economic downturn have included Central Otago producers Anthem Holdings and William Hill winery, and Marlborough's Cape Campbell.
Industry experts and insolvency practitioners have speculated that dozens of wineries could also soon slip into receivership as the sauvignon blanc variety becomes less fashionable, with the sector suffering chronic oversupply and plummeting prices.
NZ Winegrowers chairman Stuart Smith told the conference the Government's excise tax had been increased to raise prices, but was not curbing binge-drinking.
The tax was being absorbed by producers unable to pass on cost increases: wine prices had gone up only 40 percent in the 20 years the tax had been indexed, but the consumer price index had risen 60 percent.
The tax was the single biggest threat to profitability, with the Government collecting the equivalent of $15,700 a hectare in excise, while the annual income of a grapegrower in 2010 was estimated at only $10,400/ha.
Mr Smith called on the Government to review the excise tax, but Mr Carter told the conference that producers should not get their hopes up.
"I know your industry faces significant challenges," he said.
"Growing pains are clearly evident. Constrained growth is forecast over the next couple of years while there is a period of rebalancing."
Mr Smith has told the industry the only way it can cope with falling profitability is by constraining its supply.
NZ Winegrowers recently released figures which showed that though wine exports grew by more than a quarter in volume during the year to June, earnings only rose 5 percent on the same period.
And the average price of bottled export wine fell 11 percent to $8.70 a litre, with the average grape price falling to $1200/tonne, compared with $1600/tonne the year before, and nearly $2200 in 2008.
Bulk wine now made up a quarter of wine exports and its price had fallen 17 percent to $7.33 per litre.
