The 2019 New Zealand vintage was the third in a row that the industry produced less than the forecasted sales for the next 12 months.
While vintage 2015 may have been a smaller than expected, the quality was undeniable with very positive reports from virtually every region. With our reputation based on being a quality producer selling at higher price points, the high quality vintage set a great tone for the year. The smaller vintage certainly tightened supply as well, removing remnants of downward price pressure left after the larger vintage in 2014. From an industry perspective we will always be better off with a smaller, high quality vintage than a larger, lesser quality one and this was again proven this year.
In recent years, exporting wineries have succeeded in export markets such as the USA and the UK despite the high value of the New Zealand dollar. Over many years it has been clear that exporters have taken a strategic approach to key markets, continuing to invest in market development despite the $NZ being at times nearly USA 90 cents, approaching parity with the Australian dollar and being well over 50 pence against the UK£. This year with a lower valued dollar that long term view of market development has certainly paid off. Into the USA, for example, in the THREE months to the end of September the average fob price of bottled exports is up 35%, while into the UK the increase is 18%. Increases into Australia and Canada are smaller (+5% and +4% respectively) but are still definitely on the right side of the ledger. Provided the lower $NZ continues to prevail this will be a significant driver in increased export returns over the balance of the year. Final comment on the currency ... if history is any lesson the one thing you can be certain of is there is about zero chance the New Zealand dollar will sit sedately in one place for long; ours is a dynamic world and the NZ$ rises and falls as a result.
In New Zealand Free Trade Agreements may not be everybody's cup of tea, but the benefits to our industry are undeniable. We would not be where we are today in the Australian market without CER, we have made real progress in China since that FTA was signed, while our success in markets such as Singapore and Hong Kong has undoubtedly been helped by the competitive access into those markets. 2015 has seen some real momentum on the FTA front ... the Korea deal is awaiting ratification, TPP has been signed and is now going through the ratification process, while the government and the EU have announced discussions leading towards an NZ/EU FTA. If all those deals come to a successful conclusion they will provide improved access for around two-thirds of NZ's total export volume. That has got to be good news for every grower and winery in the sector.
NZW Inc – A new beginning
As all growers and wineries will be well aware, the industry voted 'YES' in the recent levy referenda, with basically 90% of voting growers and wineries supporting the new levies.
This is a very important result for the industry. It means growers and wineries have supported the big picture changes to the governance of industry organisations. Those changes will see a new entity, NZW Inc, come into being, a new way of electing the industry Board and new levy orders all in place from 1 July 2016.
Following the endorsement from members, the Board is now working through the minutiae of the plan to have a successful and uneventful transition from NZW to NZW Inc. To that end:
An application for the new levy orders has already been sent to the Minister for Primary Industries. In line with MPI requirements this has turned into a massive tome ... a 28 page summary document and supporting material of 19 appendices of well over 400 pages.
The Board has reconvened the Governance Working Group to have oversight of all the steps that need to be made to achieve the successful transition to NZW Inc. On all those changes, advice is being received from KPMG and Bell Gully to ensure necessary accounting and
legal requirements are adhered to.
1 July 2016 is set to be a red letter day for the industry. A unified industry organisation directly accountable to members will begin operations. A new Board will be elected shortly thereafter and new levy orders will be in place.
So with demand strong in key markets, exciting initiatives such as the International Sauvignon Blanc Celebration happening early in the year, and a new industry body gearing up to begin operation, 2016 already looks set to be another positive year for our sector.
Best wishes for the festive season and the upcoming Vintage 2016.