New Zealand's wine industry is seeing "signs of a new
optimism emerging" after enduring tough times since 2008, New
Zealand Winegrowers chief executive Philip Gregan says.
An annual financial benchmarking survey, released this week
by Deloitte and New Zealand Winegrowers, showed all but the
largest wineries had improved profitability during the past
financial year, compared with 2011.
Vintage 2012 tracked the results of survey respondents
accounting for a third of the industry's export sales revenue
for the 2012 financial year.
Wineries in all but the highest revenue band (more than $20
million) improved profitability and all but the smallest
($0-$1.25 million revenue) were turning a profit in 2012.
While it was pleasing to see the survey results continue to
support the signs of a turnaround within the industry which
began last year, there was still some way to go to be at a
point where the financial returns were appropriate to the
capital invested, Deloitte partner Paul Munro said.
The issue of high levels of external debt did not seem as
prominent as in past years, with debt reducing to more
acceptable levels, another positive sign.
However, with more than 50% of total sales in export markets,
the high New Zealand dollar continued to be the main issue
facing the industry, the survey showed.
Mr Gregan said 2012 saw a markedly smaller grape harvest than
the previous year, and with that reduction had come a changed
supply and demand balance.
With wine exports now worth more than $1.2 billion a year,
strong and growing demand for the industry's branded products
and reduced supply from the 2012 vintage, that should provide
further opportunity for improvement in winery margins in the
year ahead, he said.
The most profitable category was wineries earning $10
million-$20 million in revenue, with an average profit of
That marked a return to historical levels of profit for that
category prior to a dip in 2010, and was partly because of
having the lowest overhead and interest costs.
With the reduced harvest, primarily attributed to seasonal
conditions, the supply and demand balance had shifted
markedly from the bumper crops of previous years, causing
some industry nervousness of too little grape supply rather
than previous years' worries of too much, Mr Munro said.
"It is important for the sector to continue to focus on the
growth in value, rather than the volume, of sales," he said.
There were anecdotal reports new vineyard investments were
being considered and such investments needed to be carefully
assessed to ensure they were strongly market-led, he said.
New Zealand wine export volumes increased 5.3% to 175.4
million litres in the year to September, a recent Rabobank
During the past 12 months, annual bottled wine shipment
volumes lifted by 9.4% on the previous corresponding period
to 118.5 million litres, while bulk wine shipments decreased
by 2.6% to 56.8 million litres.