Glut warning

Photo / Destina Munro

PwC report urges winemakers not to overproduce again.

New Zealand winemakers have been given a production warning in a new report by PricewaterhouseCoopers.

The report, NZ Wine Insights, tells them to be cautious, lest they repeat the cycle that led a vast number of them into receivership over the past four years.

The wine industry generates $1.2 billion of export receipts, but it's at the mercy of the weather and of unpredictable foreign exchange.

"We support the general tenor of the PwC document, which is that things are improving and there's a growing sense of confidence but it's important the wine industry does not forget the glut of the past four years," said Philip Gregan, chief executive of NZ Winegrowers.

"Our point is to be market-led; don't produce simply for the sake of production."

It was important wineries did not suddenly plant more vineyards to make up for this year's shortage of wine, which is beginning to be felt locally. Cheap wine since 2008, great for consumers and terrible for makers, resulted from large vintages of grapes, compounded by exchange rates.

Ironically, wine exports grew 10 per cent a year over the past four years from $815 million in August 2008 to $1.189billion this year, but export volumes are down because of the smaller vintage.

The PwC report urged winemakers to approach the vintage with caution to avoid another possible wine glut.

Sir George Fistonich, founder and managing director of Villa Maria Estates, also urged fellow winemakers to be wary of planting too many more vines or over-cropping the vineyards they have.

He was pleased to see cheap New Zealand wine in supermarkets coming to an end and said that local wine at less than $10 a bottle retail was barely profitable.

After a six-month world tour to promote the 50th vintage of Villa Maria, Fistonich said New Zealand could best make high-quality wine, but it incurred a high cost as a result of climate challenges, including frost.

"The positive is we make some of the best wine in the world," said Fistonich.

"We are recognised for it and we have to capitalise on that by keeping our cropping levels down rather than overcropping and then discounting."

Gregan said, "There will always be cheap wine. The question is where it comes from.

"In the past three years, that wine has mostly been from New Zealand but there will be a shortage of our wine at low prices, which is good for our industry's profitability.

"Supermarkets are already replacing low-priced local wine with imports.

"It brings us back to a better balance of our own supply-demand. We must be careful to guard that."

The PwC report highlighted the receding tidal wave of low-priced local wine and predicted it would be replaced with growing confidence - and profitability - as long as makers remained cautiously optimistic.