Record grape harvest could mean hangovers

An excellent start to New Zealand's grape-growing season, indicating a record 300,000-tonne potential harvest in 2011, has wine industry leaders nervous.

A combination of rising production and pressure on what people were prepared to pay for a bottle had led to a turbulent couple of years which had "taken the sparkle off the industry a little", a recent report on the industry by Deloitte says.

Although it is a long time until harvest, and growing conditions will have the final say, the last thing the industry needs is a 300,000-tonne grape harvest, which would be 15,000 tonnes bigger than the 2008 and 2009 yields and 34,000 tonnes more than 2010.

Otago wine industry leaders say growers know production has to match demand and quality has to be maintained, and they will be pruning crops hard to ensure that is achieved.

Central Otago Wine Growers chairman Nick Mills said even though the season had started well, it was too early to speculate on the size of next year's crop, as it was a long time until harvest.

The Central Otago climate and dominance of the pinot noir grape variety - which made up nearly 79% of the region's plantings - meant growers had little choice other than to focus on quality.

The Central Otago wine industry had been restructured in the past few years, though some wineries were still struggling because of a lack of profitability, Mr Mills said.

Alistair King, a principal in the Wanaka office of accountants and business advisers WHK, agreed, adding he knew of about six out of Central Otago's 100 or so wineries that were for sale, but in Marlborough many more were for sale.

The industry was aware of the importance of matching production with demand, he said, and with flowering coming to an end, growers could soon assess the size of their crops. Then they would start pruning bunches to control the size and quality of the crop, but to prune too hard would affect next year's crop.

The Deloitte report, based on a wine industry survey of the 2010 vintage, said it was critical future supply matched global demand and that growers were market-led "to prevent a cheapening of New Zealand wines".

With the exception of the smallest wineries, the survey revealed for the second consecutive year a steady decline in profitability, falling grape prices, high inventory and continued high debt levels, the report said.

The survey splits wineries into five bands based on revenue, and in general those with revenue of $5 million to $10 million and those with revenue larger than $20 million made a profit before tax.

"While it seems the participants are surviving at present, the short-term outlook is not positive. The industry as a whole is enduring some pain and it appears this will get worse before it gets better," Mr King said.

 

Add a Comment