Editorial: Goodbye 2024
OPINION: In two weeks we'll bid farewell to 2024. Dubbed by some as the toughest season in a generation, many farmers would be happy to put the year behind them.
Long may that continue, so we have a really high-quality vintage to deliver into markets later in the year.
When we conducted our Members' Survey towards the end of 2023, views were very mixed about the year ahead, with a roughly even split between those with positive and negative outlooks for the next 12 months. However, members were very much united in their level of concern about the impact of cost increases on the sector, with 79% rating cost increases/inflation as very important, which is entirely unsurprising given inflation is still running at 5% plus.
The mixed view of the outlook for the year ahead, and the concerns over cost increases, mirrors the wider global economic outlook. According to the IMF the economic outlook for the year ahead is very mixed:
"The baseline forecast is for global growth to slow from 3.5 percent in 2022 to 3.0 percent in 2023 and 2.9 percent in 2024, well below the historical (2000 - 19) average of 3.8 percent. Advanced economies are expected to slow from 2.6 percent in 2022 to 1.5 percent in 2023 and 1.4 percent in 2024 as policy tightening starts to bite."
The advanced economies, of course, include all the major markets for our wines, including the United States, the United Kingdom, Canada, Australia and New Zealand, so consumers may well be tightening their spending belts.
While the economic outlook may be less than rosy in our major markets, the 2023 New Zealand Wine Brand Health: Consumer Tracking Report, published in December, painted a positive picture about consumer perception of our wines in key markets (you can see the webinar 'Houston, do we have a problem?' on our website). To quote Richard Lee, who oversees Intel & Insights for New Zealand Winegrowers (NZW), "New Zealand Wine brand health remains healthy with no signs of any deterioration compared to 2022 results".
Positive consumer perceptions are backed up by the latest sales data. In the US, UK, Canada and China, our in-market sales continue to grow and outperform the wider wine market, while in Australia and New Zealand our market share is solid, even if New Zealand wine is performing slightly behind the market.
This strong in-market perception and performance is a very solid base on which to build the New Zealand wine reputation in the year ahead. Short term however, wineries are having to copw with the destocking of supply chains, which was a major dynamic affecting wine exporters across the globe in the second half of 2023. The impact for New Zealand wineries was that exports declined more than 20% in the July to December period, compared to 2022, despite the strong in-market sales numbers. This is undoubtedly creating some headaches for wineries as they plan their grape intake requirements for vintage 2024.
From a NZW perspective, the downturn in exports will reduce our wine levy income in the current financial year. In response, we are targeting expenditure savings of $800,000 in the second half of the year in order to ensure we remain in a sound financial position. Despite these cost savings, we have an extensive range of initiatives planned for 2024, including completion of our IT overhaul, helping members comply with the new Freshwater Farm Plan requirements, and preparing for Pinot Noir New Zealand 2025 in February next year.
Domestically, with the new government in place we expect 2024 will be a busy year in the regulatory space. The end of 2023 saw legislation repealing Fair Pay Agreements pass through Parliament, while we are hopeful the legislation changing cellar door rules will be back into Parliament sooner, rather than later. Hopefully 2024 will see more regulatory positives than negatives.
All the best for the year ahead and a successful 2024 vintage.
