This year's grape harvest to break record
New Zealand's wine industry is gearing up for its biggest ever vintage, with this year's grape harvest expected to be around 15 per cent higher than last year's record crop.
While the quality of this year's vintage is likely to be excellent, the surge in production also raises the spectre of the oversupply problems and subsequent fall in prices that occurred during a similar production boost in 2008 and 2009.
However Peter Yealands of Yealands Estate Wines, the country's sixth largest wine exporter, said the industry was better placed to deal with the increased volume of wine this time around.
Yealands said most grape growers had aggressively thinned their vines, a practice which involves removing some grapes before they are ripe. This reduces the size of the crop and improves the quality of the remaining grapes.
Some of his vines had had up to half of their grapes thinned and as a result, the quality of the fruit was excellent.
But the growing season had been so good that Yealands expected this year's harvest in Marlborough, where most of the country's main export variety, sauvignon blanc, is produced, to be about 15 cent larger than last year's record.
Though last year's vintage was the highest ever, it followed a poor vintage in 2012 which had depleted stocks. And the world economic outlook was in better shape now than it was in 2008 and 2009 when the Global Financial crisis was in full swing which affected wine sales around the world.
"We'll manage I'm sure. This year it will be New Zealand's biggest vintage ever and I think with the global economy [improving] it will find a home without too much trouble," Yealands said.
Even with the increased supply, grape prices had not fallen and some growers were receiving 5-10 per cent more for their grapes than last year.
Brian Bicknell , the owner and winemaker of Mahi Wines in Marlborough, said grape prices were on the "highish" side and some wineries were still in the market for grapes.
That suggested they were confident of selling the increased supply.
However export sales were not being helped by the strength of the New Zealand dollar.
Bicknell said he had just hosted some overseas wine buyers who had commented that the exchange rate had forced them to start selling his wine in a higher price bracket in their own country, and that would affect the amount they sold.
Others share similar concerns.
In a statement issued with the release of the company's interim financial results last month, Mark Turnbull, the chief executive of NZAX-listed Foley Family Wines, which owns Vavasour, Goldwater, Clifford Bay, Te Kairanga, Grove Mill and Sanctuary wines, noted his concerns about the combination of a big grape harvest and high exchange rate.
"The company is concerned about the consequence of the continuing high exchange rates and the very large forecast volumes from the 2014 harvest and the impact that this will have on the industry as a whole in terms of wine sales volumes and prices," the statement said.
However the statement also noted the strength of the company's balance sheet which it said put it in a strong financial position.
That reflects a general industry trend, as grape growers and wineries recover from the downturn in grape prices which followed the 2008-2009 wine glut. That saw vineyard values fall at the same time as revenues declined and some growers were unable to sell their grapes, putting many smaller producers under severe financial pressure.
Yealands said most of the growth that had occurred in the industry over the last 12 months had been driven by wineries seeking additional grapes.
"Everyone is gaining equity back that they lost. Everyone that previously never had a market [for their grapes], now has a market," he said.
He was optimistic about his own company's prospects.
"We are finding things very, very buoyant," he said.
"We've just launched into [grocery chain] Sainsbury's in the UK and that's been a terrific launch and we are in 400-plus stores over there.
""Certainly there's no sign of Marlborough sauvignon blanc waning [in popularity] whatsoever. It's just going from strength to strength.
"The fundamentals are strong and demand is strong. It's going to be challenging moving this extra bit, but the industry's had these challenges before and handled them well."
- Sunday Star Times