Wine sector warned of oversupply

Philip Gregan says a bumper harvest could lead to a glut of wine. Photo / Richard Robinson

The potential for a bumper grape harvest is prompting warnings about the risk of over production in the wine industry.

The grape harvest in 2008 soared 39 per cent to 285,000 tonnes, resulting in a 27 million litre oversupply which helped erode wine, grape and land prices.

New Zealand Winegrowers chief executive Philip Gregan said with 33,000ha of productive area a 300,000 tonne harvest next year was "entirely, theoretically possible".

"I don't think it's meant as a forecast but the productive potential is there," Gregan said

There was better balance between supply and demand after the 2010 vintage, when 266,000 tonnes of grapes were harvested.

A harvest of more than 300,000 tonnes would take the industry back to where it was after the 2008 vintage, Gregan said.

"We said back in August that we foresaw demand for branded New Zealand wine out of the 2011 vintage equivalent to 265,000 tonnes," Gregan said.

"We can't tell them what to do but we've said you need to be very strongly market-led in the decisions that you make," he said.

"If we end up producing more than the market wants, well then consequences will follow, as economics 101 says."

Deloitte partner Paul Munro said future supply must be matched to global demand, otherwise New Zealand wines could be cheapened in key international markets.

"This may result in a rapid undermining of the industry's premium positioning, which has taken many years to build," Munro said.

A forecast for the 2011 harvest would be made in late January or early February with the harvest between March and April.