The Export Future

Setting off to London got me thinking about our export achievements to date and our export future, particularly as I am coming back through Hong Kong, where our office, in partnership with NZTE, is very strongly focused on developing the China market.

The past year has seen two very significant export milestones. First, in volume terms, New Zealand wineries now sell more wine in Australia (52.6 million litres for the 12 months to December 2013) than we do in our own domestic market (51.1 million litres for the 12 months to November 2013). The emergence of Australia as the major market for our wines has been one principal story in the development of the industry over the past decade, and certainly that market and the WET rebate received from sales there helped carry the sector through the difficult times post 2008.

The other significant export milestone of 2013 was the emergence of the USA as our second most valuable export market. For the November 2013 year, exports to the USA totalled $296 million up 12% on the previous year. This performance enabled the USA to leap frog the UK where sales were down 7% to $277 million (due to reduced bulk wine sales).

The strong US export data comes despite the challenges in that marketplace, notably the complicated distribution structure and the current $US weakness. The fact wineries have continued to grow sales into the US reflects the strategic importance of the market for many wineries.

The continuing strong performance of the US as an export destination is confirmation (if it was needed) of the priority placed on that market in the 2011 PWC review. The PWC review identified the USA as one of the top growth markets for our wines through to 2016, and urged a greater focus. Since June 2011 exports to the USA have grown by over $60 million (27% in value) and 39% in volume, a great result at a time the USA economy has been struggling with the lingering effects of recession. This value growth is nearly half the total wine export value growth since 2011.

The year ahead seems certain to see exports to the USA surge past $300 million dollars. Further with sales to Canada now valued at $78 million this means the North American market for our wines is likely to be valued over $400 million by the time 2014 comes to a close. The potential to grow significantly beyond that is also very clear.

China was the other key market for export growth identified in the 2011 PWC review. Since that time NZW and NZTE have launched the high impact programme in China and we have opened our office in Hong Kong. At June year 2011 China exports were valued at $16.9 million. The story since then has very much been an up and down one. Exports grew strongly through to $31 million for the 12 months to February 2013 but have since slipped back to $22 million. While the recent decline is frustrating, the current level still represents growth of 28% since 2011.

The exact reasons behind the recent export decline to China appear to be multifaceted. A growing shortage of wine from New Zealand (particularly from Hawkes Bay), the anti-corruption drive and trade tensions with Europe, have all been cited as possible causes. However this recent down should not distract the industry from the significant long term opportunity that exists in the China market. All the data strongly suggest there will be continuing and strong demand for wine over the coming decade and beyond. 

To capitalise on this long term opportunity NZW and NZTE have put in place an extensive programme of activities in the China market. Much of the focus is on education and information provision, including in-bound visits to New Zealand, and we are sure this is the right mix of activities to support our long term wine ambitions in that market. 

Beyond the markets mentioned above New Zealand wine continues to perform strongly in many others. While the overall UK numbers may be down, performance of our packaged wines into the UK have held up well in the past year. Additionally there are good stories in countries as diverse as Singapore, Ireland and Germany and many others. Underpinning that success is our reputation for quality and the distinctiveness that wine from New Zealand has with the trade, media and consumers.

The opportunity in 2014 and beyond is to continue to invest in that reputation so as to build a profitable long term future. As a first step, as always, we need to ensure that the coming vintage is up to the mark once again.

Good luck for the vintage. ν