KEY POINTS:
The wine industry has boosted the value of its exports by 36 per cent to a record $700 million, despite the impact of the high dollar.
But a shortage of the main export varietals such as sauvignon blanc - caused by last December's severe frosts - saw wineries cannibalising stock meant for domestic sale to meet rising international demand.
In the year ending June 31, 2007, the volume of New Zealand wine sold overseas climbed 34 per cent from 57 million litres to 76 million litres - a level equal to a billion glasses of wine sold in 95 countries, according to New Zealand Winegrowers's 2007 annual report. The value of exports to Australia grew 47 per cent to $180 million, United Kingdom exports grew 36 per cent to $227 million, and US sales rose 27 per cent to $176 million.
Chief executive Philip Gregan said the surge in value, which increased the sector's export receipts by almost $200 million on the previous year's $512 million, was an "outstanding result" given an exchange rate that had seen prices drop to their lowest point in 18 months in June.
"We benefited from the slightly lower exchange rate that was prevailing in the first half of the year, but we've seen a real effect on prices over the last three months as the dollar soared."
Had the NZ dollar remained at between US60-65c, the result would have been a "quantum leap" better, he said.
"Companies have attempted to lift their in-market prices - and it has not affected sales to any significant extent."
However, the peak in the currency over the past 2-3 months had "certainly impacted on returns".
Besides the "short-term" impact of the currency, Gregan said the secret to the industry's success was that winegrowers had continued to lift their price in an attempt to cash in on the rapidly growing premium segment of the global wine market.
He pointed to the improvements in the UK market, where New Zealand now ranked among the top five off-premises suppliers of wines above £5 - and Australia, where Oyster Bay this year became the top-selling white by value.
Although domestic sales of New Zealand wine exceeded $500 million for the first time, volume grew just by just 1 million litres to 51 million litres.
"A lot of our wineries have been experiencing shortages with some product in the past year and have a tendency when that's occurring to divert product to the export market."
Gregan said local consumers were spending on average the same amount on New Zealand wine, but "quite a bit of wine discounting" at supermarkets over the past year meant they were getting a better deal .
Although the 2007 grape harvest - at 205,000 tonnes - was a record for the industry, shortages of key export varietals such as sauvignon blanc and pinot noir due to cold weather meant the industry would be hard pressed to repeat such volume and value growth next year, Gregan said.
"We're probably looking at about up to 15 per cent volume growth in the year ahead. If we'd had the wine available, the year ahead would have been much greater than that."
Even so, continued planting of vineyard area over the next few years to increase supply would let the industry reach its goal of $1 billion in exports by 2010, Gregan said.
"Our wines are in demand and we cannot keep up with supply and that's a pretty good picture to have facing us."
However, boosting the average value of sales would be key to reaching $2 billion in exports by 2015 rather than just increasing volume, he said.
Although there was a perception the country's big wineries were driving growth, Gregan said the fastest rise in volume was actually achieved by smaller wineries.
