A total of 269,000 tonnes of fruit was harvested, which is 18 per cent down on last year. The only regions to see an increase over 2011, albeit quite minor increases, were Central Otago, Canterbury, Wairarapa and Gisborne. The rest were down, with Marlborough being the hardest hit with a decrease of 23 per cent, or 56,000 tonnes. The majority of that was Sauvignon Blanc, although poor conditions over flowering severely affected some Pinot Noir and Chardonnay blocks as well.
It was a similar story right across the country, with decreases in every major variety – with Sauvignon Blanc down 19 per cent, Pinot Noir down 25 per cent and Chardonnay, Pinot Gris and Riesling also down. Despite the big drop in Sauvignon Blanc, it is still by far the most dominant variety emerging out of New Zealand, making up just under 70 per cent of the country’s total production.
Close to 72 percent of the vintage came from Marlborough, with Hawkes Bay contributing 11 per cent of the total yield, Gisborne 4 per cent and the rest of the wine regions combined making up 10 per cent.
Does This Solve the Over Supply Issue?
That is the big question, which is not surprising given how much over supply has been on the lips of industry and media for the past four years.
New Zealand Winegrowers CEO Philip Gregan said this year’s lower than expected vintage follows on from 12 months of strong volume sales. Admittedly, many of those have been made at unprofitable levels, which is something the low 2012 vintage will hopefully alleviate.
“Sales will have to decline and we expect our largest declines will be in our most established markets .That will be New Zealand, UK and Australia. That’s where most of the cheaper wine that has been available over the last few years has sold and it’s (this area of sales) where we expect volume declines to be,” he said.
To the year ending June, New Zealand wine sales equated to 240 million litres, or the equivalent of 330,000 tonnes of fruit. If we were to experience similar sales in the next 12-month period, New Zealand would not be able to meet the orders.
We would be close to 45 million litres short, Gregan said. There will be some draw down in stocks to help with that shortfall, but he said there was very little Marlborough Sauvignon Blanc left to draw down, given the strength of sales in the past 12 months.
So What Does That Mean?
It means some wineries will have an issue this coming year, maintaining their place in the market and managing their shelf presence, built up over the past three years.
It means there will not be the volume to feed the bulk market that there has been in the past – (something most people will be happy about).
And it means the only room for growth in the immediate future is in terms of value, rather than volume.
“It’s unlikely from where I am standing that I can see any sustained growth in our volume sales in the next five or six years. It’s all going to be about value growth.”
Why Won’t There be Volume Growth in the Near Future?
Given there has been near to no new vineyard development since 2008, the producing hectares we have at the moment are unlikely to increase for some time yet.
Gregan said based on nursery capacity and rootstock availability, there is unlikely to be any substantial plantings this or next year.
“So 2014 is the first year that we will start to see much increase in planted area, leading to an increase in producing area in 2017/18.
Any production increase over the next four to six years is yield dependent. That will depend on the weather and the management techniques vineyard owners employ.”
Last year’s vintage, the largest ever at 328,000 tonnes, shows the ability for larger than this year’s crops. (There was also a lot of fruit that went unharvested, so the total could have been much higher.) Gregan said with perfect conditions, New Zealand had the ability to harvest up to 350,000 tonnes, but Mother Nature was unlikely to allow to happen year in, year out. And quality wise, would anyone want to produce yields that high? But given the sales of the past 12 months – there is going to need to be a drop off somewhere – which as pointed out earlier, Gregan expects will be in the unprofitable bulk wine market.
“We have had 240 million litres of sales in the past year and as we know, some of that has not been profitable. But 240 million litres is the equivalent of about 330,000 tonnes – a little bit more.”
And there has only been one year in New Zealand’s history that we have got close to that total – 2011.
What about the Growers and Wineries?
It has been a tough ride for a few years now for all involved in the wine industry. Gregan said the low yields this year, won’t help matters.
“Growers are going to be hit by low yields and relatively low grape prices. It’s going to be a real struggle for some.
“And clearly the wineries have had lower intakes and their fixed prices will be up.”
The wineries also face the fluctuating New Zealand dollar, which is stripping them of a large percentage of their profit margin, when exporting to the UK or US.
When asked if he expected grape prices to rise in the future, Gregan said it was economics one O one, that when supply dropped, prices rose.
He also pointed out that while some growers had to accept Sauvignon Blanc prices that were well below $1000 a tonne last year, he had not heard of anyone being in that situation this year. As a consequence he felt the average price being paid this year would be higher than last.
(Grape prices were not available at the time of writing. They are due out later this month.) ν
