From the CEO: Constants Across Four Decades

First though, a very big thank you to all the industry members who have been so supportive and giving of their time and advice over the years.

From the very first day I entered the industry it has been a huge pleasure to engage with the array of enormously talented people who work in our sector.

A heartfelt thank you to each and every one of you.

Tax!

When I joined the industry, sales tax was an issue and when I leave it, excise is still a problem – in fact a $160 million problem, given that is how much excise New Zealand wine will pay in the next 12 months.

Governments always want more tax, and the industry doesn’t. As we pointed out in a recent letter to Ministers:

‘ … the current excise rate for table wine ($3.78 per litre) equates to $2,700 per tonne of grapes harvested – the average grape price in 2025 was $1,851 per tonne. Excise is now a substantially greater cost than the grapes which go into making the wine sold in the domestic market. This is not sustainable.’

The only real advantage of the current system is predictability – we know each year the tax will lift in line with CPI, and no more. The advantage of predictability should not be understated, given the previous system (in the 1980s) was entirely unpredictable and at the whim of the finance minister of the day.

However, when inflation lifts, any benefit of predictability gets easily outweighed by the simple cost of the increase. A better system needs to found; perhaps as suggested in our letter, it should be based on the Canadian model: ‘… of an annual indexation rate of two percent or the CPI rate, whichever is the lesser.’ 

If we adopted that approach the Treasury would not benefit simply because inflation gets out of control, and wine would not have to suffer because of that.

Supply Demand Balance

A recurring theme for 40 years has been the industry’s struggle to match supply and demand. In 1986 the government intervened and 25% of the vineyard area was extracted. Since then, despite sales growing seven or eight-fold, we have seen occasional surpluses. In 2008 we had our largest ever vintage (at that time) and
a major surplus. Now we are back in surplus again.

On the other side of the coin, adverse weather has led to shortages numerous times, with 2021 being the recent low point. Shortages, of course, can and do lead to more vine planting, which then in turn fuels the seeds of future potential surpluses. In agriculture, with production heavily impacted by weather, getting balance is very difficult. Even so, it’s a good question to ask whether there is a better way to manage the supply demand balance. Given that many countries are struggling with the issue at the moment, each with their own and different regulatory systems, it seems unlikely that the answer lies in the regulatory system.

There is very likely no silver bullet to managing the future supply demand balance, but that does not mean we should not try. Ultimately if there is one, it is probably around each business (whether winery or grower) staying close to their market and not getting too far ahead of it. That doesn’t sound very satisfactory in many ways, but it is how the market works.

Sale and Supply of Alcohol Act

Finally, there are the laws governing the sale of wine in New Zealand – currently regulated by the Sale and Supply of Alcohol Act (SSAA). In 1989 we saw major reform, with the sale of wine permitted in supermarkets, while the 1999 law updated Sunday sales in off-premises and lowered the age of purchase.

There have been a few minor changes since then, but at best they are tinkering around the edges of the law. From a practical industry perspective, the SSAA adds cost and a lot of frustration to winery businesses. Our focus in recent years has been to lower those costs and frustrations, while supporting the principle of responsible consumption; hence our support for charging for tastings at cellar doors etc.

There will always be specific rules regarding the sale of products containing alcohol, and so there should be. But as with a lot of legislation, it is important to ask from time to time – ‘What public good is being achieved by this regulation, and at what cost?’ Ask what public good was achieved by having a ban on charging for tastings, and it is very difficult to come up with any argument that is even vaguely coherent. There never was a good rationale, is the simple answer, so why was the rule there in the first place, and why did it take so long for the law to change?

So, when law changes come along in the future, remember to ask that question. And remember also that in any assessment of costs, benefits need to be considered as well.

Very best wishes for the future – I am enormously confident we continue to produce the wines the world loves to enjoy!