THE YEAR IN REVIEW

The year in sales

In the past 12 months exports leapt 27% in volume to reach 113 million litres. Export value rose 24% to $992 million. The dramatic increases reflect the fact that, for the first time in recent history, the industry had sufficient inventory to supply our international markets.

With supplies of Sauvignon Blanc available following the 2008 vintage, exports of this varietal increased 37% in the past year. This significant growth, despite the prevailing global economic recession, is testimony to our strong global reputation with this style and the consequent strong demand.

Exports of other wine styles increased just 3% in volume in the past year. However this obscures the continuing success of Pinot Noir, with exports up 8% in volume, and the surge in demand for Pinot Gris, up 62% on last year. On the downside Chardonnay exports fell 13% for the June year end and Riesling was down 22%.

New Zealand wine continued to out-perform in key markets. Shipments to the UK were up 22%. In that market New Zealand wine is now the second largest category in the £8 - £9 price bracket, with a market share of more than 20%.

Exports to Australia, driven by strong demand, lifted 51% in the past year. This continues our very strong performance in this market, which has seen exports volumes to Australia lift more than tenfold since 2002.

Shipments of wine to the USA grew 18% this year. Performance in the 2nd half of the year was much improved, helped by the New Zealand dollar retreating from the very high levels of 2008.

As with exports, domestic sales volumes benefited from increased supplies from vintage 2008. Estimated sales of New Zealand wine in our home market were 60 million litres, up 29% on the previous year.

While there are clearly many positives in the achievements of the industry in the past year, some unmistakable warning signs also emerged. Despite exports and domestic sales volumes benefiting from increased supplies from vintage 2008, those increased supplies also delivered increased competition and downward price pressure. This situation was exacerbated by the global recession.

In addition, the fallout from vintage 2008 saw one other significant trend emerge — a surge in bulk wine exports.

Historically, bulk wine exports have accounted for less than 5% of total export volume; in the past year this quadrupled to nearly 20%. While bulk exports may relieve pressure on wineries in the short term, in the longer term they may significantly impact our market positioning and the reputation of New Zealand wine and our brands. As such they need to be managed very carefully.

These market developments mean that more than ever this year, industry attention has been centred on the profitability of grape growing and winemaking. Grape prices have fallen as a result of increased supplies, while wineries have had to focus to maintain margins. In the UK and New Zealand the pressure on winery margins has been further increased by significant increases in the tax on wine in those markets. Lower profits are the reality for many in our industry this year.