24 Aug 2010

Increase in wine exports dents industry profitability

1:59 pm on 24 August 2010

The chair of New Zealand Winegrowers says an increase in wine exports over the past year has come at a significant cost to the industry's profitability.

In the year to June, wine exports grew by more than a quarter in volume, but earnings were only 5% up on the year before, to over $1 billion.

The average price of bottled export wine was down 11% to $8.70 per litre.

New Zealand Winegrowers chairman Stuart Smith says as a result, grape and bulk wine prices have taken more of a hit.

He says the average grape price was $1200 per tonne in the year to June, compared with $1600 the year before, and nearly $2200 in 2008.

Prices for bulk wine, which now makes up a quarter of wine exports now, were also down 17% to $7.33 per litre.

Mr Smith says the only way the industry can cope with falling profitability is by controlling its supply, which it has started to do with a reduced 2010 vintage.

Deloitte corporate finance partner Paul Munro says many wineries and vineyards are heavily in debt because of an oversupply of wine and plunging grape and wine prices, and more receiverships can be expected over the next few months before the industry recovers.