And now for the bad news

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Feb 28, 2011

Winelovers might never have had it so good, but it comes at a cost that all of us should think about. And that is the survival in its present form of an industry which makes much of this stuff we like to drink. 

No amount of reassuring rhetoric or PR can disguise the fact that conditions are probably tougher now for New Zealand wineries, grapegrowers, for just about anyone involved in the wine industry, than at any time in the past 25 years.

So I don't buy it when someone tells me that only 10 of New Zealand's 700 wineries have gone into receivership since June last year, suggesting that things are really not as bad as they seem.

As I understand it up to 50 per cent of all wine holdings (higher in some areas) could be for sale.

Why?

Because too many people with too much money (or in some cases not enough) saw the industry as a good, not to mention a very fashionable investment; too many of them with too little thought for the varieties and quantities of grapes they planted either to sell or turn into wine which would apparently sell itself.

Fast forward to 2008 and there was a huge vintage, followed in 2009 with another whopper, this one a record 285,000 tonnes. The result was an oversupply of grapes and wine which coincided with an international economic crisis that has affected consumer spending around the world.

Add to this the inflated value of our dollar, slashing the value of exports in key markets and you get the situation that occurred last year: Wine exports actually grew by 9 per cent (to more than a billion dollars) but the average export value per bottle of wine dropped by roughly the same percentage.

In fact, almost one third of the 156 million litres of wine we exported last year was in bulk, much of it to be bottled by overseas wineries and supermarkets as New Zealand wine and sold at rock bottom prices in competition with our own.

The result of all this is that prices paid by wineries for grapes has dropped from an average $2161 per tonne in the record vintage of 2008 to $1293 last year, vineyard values have in some cases halved and so has the value of much of the wine that producers must discount to clear. Wine that once sold in the growing $15-$20, $20-$25 ranges is now selling in popular $10-$15 segment of the market.

But the biggest enemy is debt. Investors' equity has been and is still being eroded to the point that much of the industry is now being run by banks and they are calling the shots.

C/- The Southland Times - Barton on Wine WARREN BARTON