Vineyards attractive to world’s investors

The wine industry ranks second in a 15-country survey of attractiveness to investors, but faces a challenging five years, a report says.

The New Zealand Vineyard and Wine Industry Review 2005, produced by Rotorua-based consultant DANA, put New Zealand behind only Australia in a "vineyard investment attractiveness ranking" table.

It was ahead of Portugal, Chile, Germany and the United States, which occupied the next four places.

The 300-page report said that, while New Zealand remained a small player in the world wine market, its vineyard area, wine production and land values had continued to rise during the past five years.

The challenge facing the industry now was to sell the volumes of wine produced by future vintages.

Last year, grape production hit a record 166,000 tonnes, up from 118,000 tonnes in 2002. The forecast for 2010 was more than 200,000 tonnes.

One of the report's authors, David Buckleigh, said one consequence of increased production was that wine exports would have to rise significantly to avoid a build-up of stock.

If production did reach 200,000 tonnes by 2010, exports would need to double from the 31 million litres last year.

That would mean exports accounting for 60 per cent of total production, up from the present 50 per cent and 7 per cent in 1990.

"It's going to take the industry from being largely domestic market-focused," Buckleigh said.

"That changes the dynamics and also the challenges a wine company has to face, because it's at the mercy of the export market."

Despite the industry being at a crossroad, Buckleigh believed the outlook remained positive.

"A lot of our wineries - and there's nearly 500 of them - are boutique, but the country's boutique when it comes to wine production, relative to the Australians, the Chileans, the South Africans.

"I think that's a strength New Zealand will always have and it's something we can build on."

Buckleigh said maintaining the accent on quality was the key.

"When you drop down the quality ladder, then you're going to have to compete with the countries that can produce wine at a much lower cost than us and that will destroy us."

* The ranking process considered political, social, business environment, land availability, market, infrastructure and risk issues. It did not consider relative profitability of the industry.


Small is beautiful

* Most of the almost 500 wineries are boutique producers.

* Compared with global competitors, boutique can be applied to the country as a whole.

* Such smallness is seen as a guarantee of quality.

* Any drop in quality would place the industry at the mercy of lower-cost producers.

- NZPA