The PwC Review also made it clear over-supply rather than lack of demand was the reason for the rapid changes in industry dynamics post the large 2008 vintage. With the 2012 vintage only a matter of weeks away, the size of the vintage will obviously be very important in determining short term direction of the industry. The results of our Annual Pre-vintage Survey will be released in mid/late-February.
Finally on the vintage, we have not as yet heard much about prices offered for the grapes for vintage 2012. Overall prices last year fell to the lowest level in a number of years, but to some extent the impact of this fall on grower incomes was offset in some cases by higher yields. These tough times for growers are a real challenge for the industry, the ultimate answer to which is improved margins on our wines which can then flow through into grape prices.
The high $NZ ... a $244 per tonne charge on grapes
With nearly 75% of New Zealand wine sales now occurring in export markets, the state of global markets and the value of the $NZ have a big bearing on the state of our industry. The PwC report identified the higher valued $NZ in 2011 was costing the industry around $80 million per annum in lost earnings (compared with 2007). By my calculation that is the equivalent of $244 per tonne for every tonne of grapes harvested in 2011 – and this is the reason growers as much as wineries should be concerned about the gyrations of the $NZ.
The beginning of the New Year has seen no let up in the global financial turmoil which has dominated the international news agenda since 2007. For wine exporters, there does not appear to be much hope on the horizon of any period of calm in foreign exchange markets, and with the government here seemingly reluctant to think outside the square, it seems this is something that we have to live with. So not a lot of good news there....
Pinot Noir and other stars ... $250 million and rising
The New Zealand wine export story continues to be dominated by Sauvignon Blanc which currently represents 84% of export volume and an estimated 78% of export value.
With Sauvignon Blanc (and Marlborough Sauvignon Blanc in particular) such a huge part of the NZ wine success story, the progress being made with other styles is often overshadowed. Pinot Noir exports, for example, have grown from $5 million in 2000, to $120 million in 2011. Pinot Gris exports have grown from less than $1 million in 2000 to over $25 million in 2011.
Overall in 2011 we expect exports of wine other than Sauvignon Blanc to have exceeded $250 million for the first time.
New Markets ... also $250 million and rising
Up until the mid-1980s our only market was New Zealand. In the later 80s and early 90s we had success in the UK, from the mid 90's until the middle of the last decade the new growth markets were the USA and Australia, while more recent years have seen the development of non-traditional markets in Asia and Europe.
In 2000 our core export markets of UK, Australia and USA accounted for $135 million or 80% of total export value, with other ('new') markets accounting for just $33 million. By 2005 exports to those new markets had grown 118% to $72 million. In 2011 we expect exports to those 'new' markets will have exceeded $250 million for the first time, led by growth in markets such as China and Hong Kong.
Implementing the Strategic Review
Finally, from an internal NZW perspective, along with all the normal operational matters we need to address, our key goal in the year ahead will be implementing the results of the PwC Strategic Review.
We will be sending regular updates to growers and wineries to report on progress with implementation.
Best wishes for a successful vintage and a prosperous year ahead. ■
