Wine industry well placed for big challenges

17 December 2003

New Zealand wine industry well placed for big challenges

New Zealand wine producers face big challenges in the next few years as the industry becomes characterised by a doubling of export volumes combined with static consumption and worldwide oversupply.

The industry is, however, well placed to capitalise on future trends towards premium and super-premium quality wine with its Pinot Noir and Sauvignon Blanc varieties, according to the latest MAF 2003 Situation and Outlook for New Zealand's Agriculture and Forestry (SONZAF).

The SONZAF report says that by the year 2006/07 it is expected that 20,000 hectares will be under producing grape vines - that's up from 15,400 in 2003.

The report says considerable investment in processing capacity and market development will be needed over the next four years to handle the increase in production.

Export volumes are forecast to increase by over 160-percent in the years to 2006/7 reaching 60-million litres. In the medium term, New Zealand FOB wine prices will continue to face pressure from international markets, though much will depend on exchange rate movements.

Contract prices are expected to fall slightly in the medium term as production volumes increase and export prices fall.

The SONZAF report says in a global market characterised by static consumption and oversupply, the challenge for New Zealand producers will be to maintain both their wine's reputation for quality and the high prices they currently receive.

The UK is New Zealand's largest market but competition from other New World wine producers has allowed UK importers to reduce prices for New Zealand wines. This is likely to be the first sign that global competition is a real threat to New Zealand exporters in their premium-priced markets.

The report says the way the industry works together to generically brand its wine along with the "clean-green" image will be an important aspect of its ability to compete successfully.

It says the industry's future will be determined by how successful it is in investments in marketing, branding and promotional strategies.

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