New Zealand's historic free trade deal with the United Kingdom is "very positive" for the New Zealand wine industry, says New Zealand Winegrowers Chief Executive Philip Gregan.
Since then there have been one or two inflation spike but, all of a sudden, price increases are big new with inflation at levels not seen in the past 30 years.
While our growers and wineries will be impacted by general cost increases like other industries, there are a couple of issues (specific to our industry and related ones) that are a significant focus of New Zealand Winegrowers (NZW) activity: excise which has been long-standing concern, and now the Container Return Scheme.
Excise has long been a major issue for anyone selling wine in the domestic market, as it is a significant cost for producers and increases each year in line with the rate of inflation. It is an issue that we raise with officials and politicians on an ongoing basis. Now with inflation at a 30 year peak the outlook for the upcoming excise increase is even more daunting.
For the December 2021 calendar year inflation was 5.9%. Apply that rate to the current excise rate of $3.11 for table wine, and you get an excise increase of 18.3 cents per litre, or $1.65 per case (12 x 750ml bottles).
But unfortunately, it could be even worse than that, given inflation is currently increasing, not decreasing. So, imagine if March year end inflation is 7%; the excise increase would be 21.8c per litre, or $1.96 per case - all that on top of the excise rate already being paid.
A 7% increase would lift the total excise on table wine to around $29.94 per case. Fortified wine, of course, is a whole level higher.
Container Return Scheme
However, excise is not the only government-imposed cost increase producers are facing. One of particular concern is the Container Return Scheme (CRS) which has the potential to add another 20c per bottle to the retail price of our products. This was revealed on Sunday, 13 March, when the Government announced a consultation on Transforming Recycling - Container Recycling Scheme.
NZW has been heavily involved in consultation on this proposal in recent years, with many related industry partners and packaging companies. In our view, we have prevented a compelling case to exclude bottles from the new CRS (see what we have been up to at nzwine.com/crs).
The process leading to the Government's announcement has been fraught, with a pilot study on a CRS launched in the midst of consultation on waste reform legislation. The proposal is to impose an extra cost on all containers of 20c per container (plus administration costs) and then to pay that back when the product is recycled.
In developing the proposal, the Government has ignored the very positive rates of glass recycling. We agree with the goal of improving recycling, but do not believe a 'back to the old days' scheme like this is the way to go. Some simple steps like separation of waste streams (i.e, ending co-mingling in council refuse collections) would be a much better first step, rather than imposing a new tax.
Submissions on the consultation document close on 4 May. We will be making a detailed submission on the proposal and will circulate this to wineries in advance of the close-off date. For details on the government proposal see environment.govt.nz/assets/publications/Transforming-recycling-consultation-document.pdf
Given the costs to wineries will be significant, we urge members to make a submission on the proposals. How to make a submission is detailed at the government website.