The Wine Year: Records Abound, More Growth Ahead

For immediate release 26 August 2004

The Wine Year: Records Abound, More Growth Ahead

The New Zealand grape and wine industry has enjoyed another record year according to New Zealand Winegrowers’ Annual Report 2004.

The Annual Report highlights a number of industry developments for the year ending 30 June 2004, notably:

- Continuing strong growth in international sales of New Zealand wine which reached 31.1 million litres and $302.6 million, an increase of 15% in volume and 7% in value on the previous year. Combined with steady domestic sales, the strong export performance meant total sales of New Zealand wine were a record 66.6 million litres

- A record and high quality vintage of 166,000 tonnes, 40% greater than any previous harvest.

- Continuing growth in the producing area of vines which is expected to exceed 22,000 hectares in 2007, up from 18,000 hectares this year, and just 10,200 hectares as recently as vintage 2000

Commenting on the industry achievements, New Zealand Winegrowers’ Chair Peter Hubscher said “Industry sales performance in the past year was strong, despite the constraints imposed by the reduced 2003 vintage. A decade ago exports were just 7.9 million litres valued at $41.5 million, so with exports at over 30 million litres and $300 million we have come a long way in a short period of time.”

Looking ahead, Mr Hubscher is optimistic about the prospects arising from vintage 2004. “The vintage has yielded fruit variously described as well above average to excellent, while early release wines appear to have been well received by commentators. Overall we are very confident the vintage will add to our international reputation.”

In the Annual Report Mr Hubscher notes that the forthcoming year will see yet another milestone for the industry. ”Fuelled by the record 2004 vintage, our exports will exceed 50% of total sales for the first time. This will be a landmark achievement in the on-going growth of the industry. “

Mr Hubscher is clear that the greater volumes of wine from vintage 2004, while providing a platform for growth, also represent a challenge to the industry. “In the year ahead the industry needs a greatly increased marketing and promotional effort. Without such an effort the industry will fail to capitalise on the opportunity provided by vintage 2004. Further, the vintage will provide a particular challenge to those industry participants who have not planned well for the future.”

The high value of the New Zealand dollar is also proving a challenge to the industry, according to Mr Hubscher. “The wild fluctuations in the foreign exchange markets in the past year have been extremely challenging for exporters. The higher New Zealand dollar has been an undoubted factor contributing to the per litre value of exports falling for the first time since 1995. The reduced return to wineries has lowered the profitability of exporting, at a time when input costs, notably grape prices, peaked at record levels”

Key Features

Other key features of the 2003/04 grape and wine year include:

- A record payment of nearly $170 million to contract grape growers from wineries for the 2004 vintage, 50% higher than ever before.

- Passage of the Wine Act through Parliament which will provide a modern regulatory base for industry growth

- Continuing growth in the number of wineries in New Zealand - they now total 464, up from 421 in 2003.

- The collapse of the fortified wine market in New Zealand in the past year, following the fortified excise increase in May 2003. Fortified wine sales are down 41% following the tax increase.

- Concerns in the industry about the Wine Equalisation Tax changes in Australia which small wineries believe will give an unfair advantage to Australian wineries.

- Launch of a promotional programme by New Zealand Winegrowers for the year ahead valued at over $4.0 million, 40% larger than ever before, to which there has been a strong response from exporters.

- Funding for the largest ever wine research project in New Zealand on Sauvignon blanc flavour and aroma, totaling over $14.4 million over the next six years.

The Annual Report concludes by stressing the importance of growers and wineries working together to address the issues confronting the industry.

“New Zealand Winegrowers is founded on the belief that by working together we will build a more prosperous industry. Now more than ever is the time for the industry - growers, wineries, suppliers, and exporters - to work together to further the success of our business. We are confident that by doing so we can overcome any uncertainties to build an even more prosperous future” said Mr Hubscher.

Key Statistics
2003 2004
Number of wineries 421 464
Producing Vineyard Area (ha) 15,800 18,112
Grape production (tonnes) 76,400 166,000
Domestic Sales (m. of litres) 35.3 35.5
Exports (m. of litres) 27.1 31.1
Exports ($) 281.9 302.6
Ave. value of exports ($/litre) 10.39 9.73

ENDS

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